Most of the Bitcoin supply is now loss-making

Posted on

key takeaways

  • Bitcoin was the best performing asset class between 2011 and 2021, but 2022 brought nothing but pain
  • After surging 14X from its pandemic low in March 2020 to its all-time high of $68,739 in November 2021, bitcoin has struggled in a risky environment
  • The pullback has been so severe that much of the supply is in deficit.

what ride is it for Bitcoin,

But as we close the chapter of 2022, the party has turned into a nightmare for most. Literally, most. Because most of the bitcoin supply, which is 19.24 million bitcoin as I write, is in deficit.

I have first written Regarding this trend, and as shown in the chart above, we have previously seen over 50% of the supply in deficit. But after a respite, the market went down again after a certain Mr. Bankman-Fried was exposed.

But while bitcoin was the best performing asset class in the world in the decade between 2011 and 2021, it is a pretty sobering statistic. Last year a fraction of a penny exploded to close to $69,000, making a lot of people very, very rich.

But for anyone shopping during the pandemic, the story is likely to be very different. In extrapolating the above graph back over the course of the decade, the ups and downs are evident.

Unprecedented Macro Environment for Bitcoin

One thing that is clear is that for the first time in bitcoin’s history, it is now experiencing a bear market in the broader economy.

Launched in 2009, bitcoin enjoyed one of the longest and most explosive bull markets in financial history, until 2022. Risk assets skyrocketed across the board, with the S&P 500 printing 7X returns from its low point in early 2022 amid the Great Financial Crash.

“Scams and unknown risks in the cryptocurrency space have been numerous this year. Nonetheless, despite the rapid events taking place in the crypto industry, which have undoubtedly made things worse, the broader macro environment has caused bitcoin to fall, which has made it difficult for anyone to think. joked that bitcoin is not a high-risk asset”. When assessing the 2022 price action of bitcoin, said Max Coupland, director of CoinJournal.

On this note, when plotting the price level of bitcoin against the S&P 500, everything looks healthy. Only thing is, I cut off the charts in early 2022.

The chart below does just that – plots the S&P 500 against Bitcoin. Only this time, it’s focused on 2022, showing that both the stock market and bitcoin are down.

Killing the “Bitcoin is Uncorrelated” Narrative

Of course, the statement that bitcoin is uncorrelated is completely dead. Not only that, but the misguided view that led some to conclude that bitcoin is an inflation hedge has been proven foolish.

There is no other way to put it – bitcoin trades like a high risk asset.

In fact, it has traded like such a high-risk asset that it was not only the best-performing asset of the decade between 2011 and 2021, when the market boomed and all these risk-on assets printed meteoric gains, But now we are experiencing the flipside. , it has performed worse than almost anything else.

It has pulled back so badly that the gains that claim the title of best performing asset are no longer enough to offset the fact that most of the supply is held by investors at a loss.

If you use our data, we would appreciate the link back, Attributing our work with a link helps us keep providing you with data analysis research.

Research Methodology

Leave a Reply

Your email address will not be published. Required fields are marked *