Bitcoin Traders Face Record Losses: Is It Time to Buy and Hold?

• Bitcoin traders face a -17% profit/loss margin, the lowest since November 2022 post-FTX collapse.
• Current negative margins suggest a buy opportunity, mirroring previous market bottom conditions.
• Historical data indicates long-term holders could benefit from buying Bitcoin during this dip.

Bitcoin traders are currently facing unprecedented losses, according to recent data from CryptoQuant. The on-chain trader realized price and profit/loss margin indicate that margins have plummeted to -17%, marking the most negative point since November 2022. This drop occurred shortly after the collapse of the FTX exchange, a significant event in the cryptocurrency world. For long-term investors, however, this may signal a prime opportunity to buy and hold Bitcoin, anticipating a market recovery.

Over the past year, Bitcoin’s price has experienced notable volatility. The realized price, which reflects the average purchase price of Bitcoin held between one and three months, has remained relatively stable. However, the actual market price has seen significant peaks and troughs. Particularly, in March 2024, Bitcoin’s price soared to around 70K, its highest point on the chart. Despite these fluctuations, the profit/loss margin, representing trader profitability, has declined sharply since this peak.

The profit/loss margin reached its highest point in early 2024 but has since fallen dramatically. By July 2024, this margin had dropped to -17%, indicating that traders are generally experiencing losses if they choose to sell now. This margin is the lowest recorded since November 2022, shortly after the FTX collapse. This historical comparison suggests that Bitcoin is currently in a period similar to the pico bottom of the previous bear market. 

Analysts like ImNotTheWolf believe that the current negative profit/loss margin represents a significant buying opportunity. Historically, such negative margins have been associated with market bottoms. For example, after the FTX collapse, the profit/loss margin was similarly low, but those who bought during this period saw substantial gains when the market recovered. The current situation mirrors these conditions, suggesting that long-term holders could benefit from accumulating Bitcoin at these low prices.

The commentary from CryptoQuant underscores this perspective. They note that Bitcoin traders would only realize losses if they sell now. Therefore, the recommendation is to buy and hold, or “hodl,” as it is commonly referred to in the cryptocurrency community. This strategy anticipates that the market will eventually recover, leading to potential future gains.