Half of $BTC is underwater and the charts are basically shrugging 🏊

Over half of all Bitcoin in circulation is currently held at a loss, a level that digital asset brokerage K33 said has historically marked the late stages of a bear market. In a report published Tuesday, K33 noted that the percentage of circulating BTC supply sitting at a loss has crossed 50%, a signal that has preceded previous cycle bottoms by weeks.

Past cycles bottomed quickly after the threshold was reached, according to K33. During the 2017 bear market, Bitcoin bottomed 31 days after more than 50% of BTC supply was held at a loss. The November 2018 bottom followed 23 days after the signal, and the November 2022 bottom came about 13 days after. The 2014 cycle was the outlier, bottoming 101 days after half the supply was held at a loss and remaining lower one year later, down 25%.

K33 also said that because the past year's bull market was less extreme than earlier cycles, the current downturn could be less severe. The firm added that large sellers, including spot Bitcoin exchange-traded fund holders, could make this cycle behave differently from prior ones given their impact on price.

Spot Bitcoin ETFs registered two consecutive days of inflows, including $265 million on Monday, but recorded $4.51 billion in net outflows in June, their worst month on record, according to Farside Investors data. Separately, Strategy sold 3,588 Bitcoin for $216 million to fund dividends while keeping a $2.55 billion reserve intact.

Other indicators are also pointing to a possible turning point. The Block Scholes Risk Appetite Index, which tracks bullish and bearish momentum in digital assets, fell to a low of -1.27 on July 3 and has since rebounded. Across eight prior instances of similar moves, the index preceded a median spot BTC return of 12% over the following 100 days, Block Scholes said. "Historically, such a move has preceded a more bullish outperformance in spot prices and could lead to further allocation towards risk assets such as crypto," a spokesperson for Block Scholes told Cointelegraph.