Bitcoin (BTC) Profit Supply Drops to 52% in Late Bear Signal

Bitcoin News

Bitcoin (BTC) is flashing a late-stage bear market signal after on-chain data showed that only 52% of circulating supply remains in profit. The figure, published by CryptoQuant on Aug. 5, means almost half of all BTC held in circulation is underwater at current prices. CryptoQuant analyst Darkfost noted that prior bear cycles typically reached a turning point when the loss-side share grew large enough to exceed the profit-side share. The current reading has not yet crossed that line, but it is close enough that cycle researchers are treating the 50% area as a major historical marker. In June and July, the same indicator dipped below 50% for short periods before recovering, which suggests the market has already tested extreme stress without establishing a durable final bottom. Darkfost cautioned that no model can call the exact low, while adding that the structure of the current decline looks consistent with the final portion of a bear cycle. That framing matters because Bitcoin's profit supply tends to compress during prolonged drawdowns as short-term holders sell at losses and long-term holders become the marginal owners. The signal is not a timing tool by itself; it identifies exhaustion in the holder base rather than an immediate reversal. Market bottoms have historically required both supply profitability compression and a washout in sentiment, while rebounds have failed when the profit ratio stabilized too early. The current setup therefore gives investors a measurable checkpoint: watch whether the 50% threshold becomes a floor or a breakdown level. If the metric stabilizes and then begins rising, it would show that coins acquired at lower prices are regaining profitability. If it continues lower, it would confirm that selling pressure is still moving through the market. For now, the 52% reading places Bitcoin in a historically late zone, even though the data does not yet show the deeper capitulation seen at previous cycle lows.

Glassnode's Bitcoin Cycle Position Heatmap adds a second on-chain layer, showing that Bitcoin has spent 2026 in a capitulation phase that is now the longest since the FTX collapse. The tool, developed by co-founder Rafael Schultze-Kraft, aggregates 45 price and market-health indicators into one visual reading. Blue areas mark capitulation, while red areas mark the kind of momentum that often appears near cycle peaks. Schultze-Kraft said the market is in its coldest phase since FTX, describing the current condition as late in a bear market but not yet the deep blue state that previously marked a final base. In November 2022, FTX's failure pushed Bitcoin to its last major bear-market bottom near $15,600, and the heatmap remained blue for much of that downturn. The present signal is therefore not a call that the bottom is already complete; it is a measurement that weakness has persisted longer than at any point since that episode. Glassnode's latest Market Pulse also noted that network usage has strengthened even while price conditions remain fragile. Daily active addresses and entity-adjusted transfer volumes moved above their upper statistical bands, pointing to higher economic activity on the network. CryptoQuant separately recorded a rise in transactions of 1 BTC or less, with daily volume reaching 39,600 BTC on July 31, close to the 39,900 BTC seen on Nov. 16, 2022, after the FTX failure. The comparison matters because sub-1 BTC flows have often coincided with accumulation or self-custody shifts during stressed periods, although the metric alone cannot prove spot buying. The report also said that despite a low-entropy flaw involving Coldcard hardware wallets, capital outflows stayed stable, suggesting that the wallet incident did not turn into a broad on-chain exit from Bitcoin. Together, these readings show a market where weak price structure is coexisting with resilient network usage.

COINOTAG's analysis ties these two datasets to a single arc: Bitcoin is late in its bear cycle, but the final washout is not yet confirmed. The primary on-chain records show profit supply near the 50% historical stress band and the longest capitulation phase since November 2022, while network activity remains strong. Such conditions have historically emerged when Bitcoin is far below its all-time-high phase. The key confirmation would be a sustained recovery in the profit-share metric and a move out of Glassnode's blue zone. A failure to regain profitability would keep pressure on shorter-term holders and extend the drawdown. Until then, the market remains defensive.