Bitcoin short-term holders need liquidity reset as 22% of BTC supply sits in loss

Bitcoin’s next uptrend hinges on fresh liquidity, with Glassnode saying BTC’s profit/loss ratio must rise well above 5 as 22% of supply sits in loss and selling risk lingers.

On-chain analytics firm Glassnode has identified key metrics that will determine the next phase of Bitcoin (BTC) price growth, according to a recent analysis published by the company.

Bitcoin has experienced a downward trend, with price increases proving unsustainable due to insufficient buying liquidity, according to market data. After Bitcoin maintained its support range in recent weeks, market attention has shifted to liquidity conditions, Glassnode reported.

Glassnode shows long-term BTC holders selling

The firm stated that a meaningful trend reversal and uptrend in Bitcoin requires a recovery in market liquidity. For a sustainable upward trend, the profit/loss ratio must remain above a certain level of its 90-day moving average, according to the analysis.

Drawing on historical data, Glassnode reported that strong price recoveries, including mid-cycle rebounds in the last two years, only occurred when the profit/loss ratio remained above 5. A ratio above 5 indicates consistently renewed liquidity inflows and a return of capital to Bitcoin, according to the firm. The current rate stands at approximately 2, well below the threshold identified by Glassnode.

The analytics firm also identified Bitcoin’s supply structure as a source of pressure. Glassnode estimates that approximately 22% of the circulating Bitcoin supply is currently at a loss, a level similar to correction phases seen in the first quarter of 2022 and the second quarter of 2018. This increases the risk of a correction and could reignite selling pressure if Bitcoin fails to hold key support levels, according to analysts.

However, selling pressure appears to be short-term and limited, according to market observers. A CryptoQuant analyst noted that Binance Bitcoin inflows remain at historically low levels, suggesting investors are holding rather than selling. While a risk of a short-term pullback exists, the analyst stated that the decline would likely be limited, and a sustained improvement in liquidity indicators is necessary for a full-blown uptrend.