Bitcoin Supply in Loss Reaches Peak: The Crucial 65k Liquidity Purge

BTC price volatility tests the resolve of market participants during this uncertain period.

The Bitcoin Bloodbath Beneath $65,000: Are We Witnessing a New Kind of Capitulation?

➖ Bitcoin clawed back to the psychologically potent $65,000 mark recently, a familiar battlefield. But as the market’s attention fixated on this price point, a more unsettling truth emerged beneath the surface: the sheer volume of Bitcoin now sitting in loss.

After multiple attempts to hold, BTC slipped below $65,000 again. This wasn't just a technical retracement; it triggered a significant increase in supply now underwater, pushing stress levels higher for a substantial portion of the market.

Historical extremes in BTC loss supply often precede a decisive market reconfiguration.

BTC Price Trend Last 7 Days

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📌 The Hidden Cost 10 Million BTC Underwater

The recent price pullback has created a critical stress point across the Bitcoin network. On-chain data reveals a dramatic spike in the percentage of Bitcoin supply held at a loss, hitting levels not seen often in history.

Specifically, approximately 10 million BTC are now caught on the losing side of the ledger. This figure marks the fourth-highest reading ever recorded, indicating that a significant proportion of recent buyers are currently underwater.

➖ An additional 70,000 BTC, acquired between February 6 and 24, also plunged into loss. This brings the total circulating supply, which is expected to reach 20 million BTC next week, to approximately 50% in loss. Here's what no one is talking about: this "massive supply loss" could, paradoxically, be a necessary step.

Historically, such extensive capital destruction has often preceded a market bottom. The thesis suggests that sufficient pain is inflicted, clearing out weaker hands and setting the stage for a reversal. However, this cycle carries new variables.

📌 Event Background and Significance The 65K Crucible

🌊 Bitcoin's journey has always been punctuated by these painful cleansing events. The $65,000 level itself has become a crucial liquidity magnet and a point of intense contention, often marking the upper boundary of consolidation or the lower bound of distribution in recent months.

Record levels of BTC supply at a loss indicate a significant structural shift.

🔴 The current rise in "supply in loss" is significant because it's happening at a much higher absolute price point than previous bottoms. This isn't the familiar, gut-wrenching descent from all-time highs that we’ve witnessed in past bear markets.

Instead, it's a structural re-pricing within a bullish trend, albeit a brutal one. The context is crucial: the market is digesting the initial euphoria of spot ETF approvals and the subsequent front-running of the halving. This dynamic introduces new layers of complexity to how "loss" is interpreted.

🚩 Market Impact Analysis Volatility and the Institutional Bid

This substantial Bitcoin supply now in loss directly impacts short-term price volatility. We are seeing increased selling pressure from those seeking to de-risk or realize losses for tax purposes, contributing to downward momentum.

Investor sentiment is understandably fragile. The immediate outlook appears bearish, with many waiting for a clear signal of accumulation. However, a contrarian perspective suggests that this forced deleveraging could strengthen the market's foundation.

The long-term effect of this "capital destruction" depends heavily on who is holding these underwater coins. If it's predominantly new retail or levered traders, the cleansing is typical. If it's institutional players, the implications for market structure and recovery speed are different.

In my view, the question isn't whether there's pain, but who is absorbing that pain on the bid side. The presence of institutional inflows via spot ETFs means there's a new, relatively price-insensitive buyer class, which wasn't as prevalent in prior market cycles.

Professional investors interpret these BTC stress points as necessary phases for long-term growth.

📍 Stakeholder Analysis & Historical Parallel The FTX Fallout November 2022

The most comparable event within the last decade is the November 2022 capitulation following the FTX collapse. At that time, Bitcoin plunged to roughly $16,000, triggering a massive wave of forced selling and realized losses, particularly among Long-Term Holders (LTHs) who had previously been resilient.

The outcome was a brutal but necessary market reset. The lessons learned were clear: structural integrity and counterparty risk are paramount, and even strong holders can be forced to liquidate under extreme conditions. The market needed to rebuild trust and absorb significant systemic shocks before a sustained recovery could begin.

In my view, while the capital destruction then was more acute in percentage terms, the fundamental difference today lies in the underlying market structure. The 2022 capitulation was a systemic shock; today's "supply in loss" is a re-evaluation of valuation, with a strong institutional bid underpinning the market structure. We are seeing significant on-chain loss at almost 4x higher price levels than the 2022 bottom, indicating that the market has fundamentally re-rated where "cheap" Bitcoin now sits.

The current situation is less about a cascading insolvency crisis and more about a sustained grind that's shaking out participants who bought near the cyclical highs, or those using leverage that became untenable at $65,000.

Stakeholder	Position/Key Detail
James Van Straten (Analyst)	⚡ Highlights 10M BTC supply in loss, fourth-highest ever; signals critical stress point.
Darkfost (Analyst)	📉 Urges examination of investor cohorts; LTH profit at 74% but dropping; warns against certainty.

🔑 Key Takeaways

• Bitcoin's recent drop below $65,000 has pushed approximately 10 million BTC into an unrealized loss, a historically high level signifying significant market stress.
• This substantial "supply in loss" suggests a potential for a market bottom, as prior cycles saw similar capital destruction precede reversals, albeit at much lower price points.
• Long-Term Holders (LTHs) are seeing their average profit drop from 74%, with their cost basis moving closer to the current market price, a critical indicator to watch.
• The current market dynamic differs from past bear cycles due to the new institutional presence, which may provide underlying support during periods of high "supply in loss."

🔮 Thoughts & Predictions

The current spike in "supply in loss" is not the same capitulation narrative we saw during the November 2022 FTX collapse. While painful, this time, the structural difference is the unwavering, if sometimes delayed, institutional bid. The market is less susceptible to a full systemic unraveling, but more prone to a prolonged grind that tests the conviction of every new entrant who bought above $60,000.

The immediate future likely holds continued volatility, as this 10 million BTC in loss needs to be either re-absorbed or capitulated. I foresee a period where Bitcoin's price action becomes more about accumulation at perceived "fair value" by institutional players rather than a sharp V-shaped recovery driven by retail FOMO. The LTH cost basis, currently around $38,900, remains a critical line in the sand, but a breach would indicate a much deeper, possibly institutionally-driven, re-pricing event.

Navigating the current BTC downturn requires a focus on underlying market mechanics over noise.

💸 Ultimately, this "supply in loss" is a pressure valve. The market's ability to absorb it, particularly above the LTH cost basis, will dictate whether this is merely a healthy correction within a longer uptrend, or a signal of a more fundamental, albeit less dramatic, shift. The smart money isn't exiting; it's simply patient, waiting for the weak hands to finish their disciplined unwind.

🎯 Investor Action Tips

• Monitor the 10 million BTC "supply in loss" metric: A sustained decrease in this number, even amidst sideways price action, signals silent accumulation absorbing weak hands.
• Watch the LTH cost basis, currently around $38,900. A breach below this level would indicate a capitulation phase fundamentally different from 2022, likely involving a new class of forced institutional sellers.
• Observe the delta between institutional spot ETF inflows and on-chain realized losses. If ETF inflows remain robust while "supply in loss" persists, it implies new demand is holding the line against retail capitulation.

📘 Glossary for Serious Investors

Long-Term Holders (LTHs): Bitcoin investors who have held their coins for at least 155 days, generally considered less sensitive to short-term price fluctuations and representing strong conviction.

Cost Basis: The average price at which an investor acquired their holdings. For LTHs, it's the average price of all Bitcoin held for over 155 days.

Capitulation: A market phase characterized by widespread panic selling, particularly by long-term holders, resulting in significant price drops and often marking a market bottom.

🧭 The Question Nobody's Asking

If half of Bitcoin's circulating supply is now in loss at $65,000, yet new institutional capital continues to flow into a more regulated ecosystem, what truly constitutes a market bottom in this radically re-engineered cycle?

📈 BITCOIN Market Trend Last 7 Days

Date	Price (USD)	7D Change
2/19/2026	$66,456.35	+0.00%
2/20/2026	$66,918.68	+0.70%
2/21/2026	$67,970.29	+2.28%
2/22/2026	$67,977.91	+2.29%
2/23/2026	$67,585.12	+1.70%
2/24/2026	$64,577.55	-2.83%
2/25/2026	$64,074.11	-3.58%
2/26/2026	$68,920.62	+3.71%

Data provided by CoinGecko Integration.

💬 Investment Wisdom

"The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism."
— Benjamin Graham

Crypto Market Pulse

February 25, 2026, 20:10 UTC

Total Market Cap

$2.45 T ▲ 6.66% (24h)

Bitcoin Dominance (BTC)

56.26%

Ethereum Dominance (ETH)

10.19%

Total 24h Volume

$128.77 B

Data from CoinGecko

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