Bitcoin’s Sub-30% Underwater Supply Signals Price Action Mirroring Early 2022 Patterns
Bitcoin's supply dynamics just flashed a familiar—and potentially ominous—signal. With less than 30% of its total supply now held at a loss, the on-chain setup looks eerily similar to the conditions that preceded a major downturn in early 2022.
The Underwater Metric
The 'underwater supply' figure—coins held below their purchase price—has dipped below the 30% threshold. That's a critical level historically associated with a thinning of weak hands and a potential shift in market structure. It's the same reading that painted the charts before the last significant correction.
A Market at a Crossroads
This isn't just a data point; it's a mood. The metric suggests a market that's either consolidating for a healthier move up... or one that's complacent and ripe for a shakeout. The parallel to early 2022 is impossible to ignore for anyone who lived through that cycle—a period where optimism briefly outweighed on-chain reality before gravity reasserted itself.
History rarely repeats verbatim, but it often rhymes with a cynical smirk. While traditional finance fiddles with spreadsheets, Bitcoin's blockchain ledger cuts through the noise, offering a raw, unfiltered look at investor pain and potential. The current setup demands attention, not alarm—a reminder that in crypto, the most reliable patterns are often the painful ones.
As long as this stays above zero, price can still build a base instead of falling apart. Meanwhile, long‑term investors continue to sell into strength, but at shrinking margins, with the Long‑Term Holder SOPR (30D‑SMA) stands at 1.43.
Derivatives and options reset risk across the board
Spot demand now looks lighter. U.S. Bitcoin ETFs flipped into net outflows across November on a three‑day average basis. The steady inflow that supported price earlier this year is gone. Outflows hit many issuers at once. Institutions pulled back as market pressure built. That leaves price more exposed to outside shocks.
At the same time, Cumulative Volume Delta turned negative on Binance and across the aggregate exchange group. That signals steady taker selling. Coinbase flattened as well. That removed a key sign of U.S. bid strength. With ETF flows and CVD both defensive, spot demand now runs thin.
Derivatives followed the same path. Futures open interest kept falling through late November. The unwind stayed slow and orderly. The leverage built during the uptrend is now mostly gone. New leverage is not entering. Funding rates cooled near zero after months of positive prints. Modest negative funding showed up at times but never lasted long. Shorts are not pressing hard. Positioning now sits neutral and flat.
In options, implied volatility dropped after last week’s spike. bitcoin failed to hold above $92K, and sellers stepped back in, so short‑dated volatility fell from 57% to 48%, mid‑tenor slid from 52% to 45%, and long‑dated eased from 49% to 47%.
Short‑term skew fell from 18.6% to 8.4% after Bitcoin’s price rebounded from $84.5K, a drop tied to the Japanese bond shock. Longer maturities moved slower. Traders chased short‑term upside but stayed unsure about follow‑through.
Early week FLOW leaned heavy on put buying tied to fears of a repeat of the August 2024 carry‑trade stress. Once price stabilized, flow flipped to calls during the rebound.
At the $100K call strike, call premium sold still exceeds call premium bought, and the gap widened during the past 48 hours. That shows weak conviction to reclaim six figures. Traders also sit ahead of the FOMC meeting without chasing upside.
Crypto entrepreneur Lark Davis pointed out that crypto whales dumped the market, then “Charles Schwab, Vanguard and Bank of America all roll out crypto to their clients in the same week. What a happy coincidence!”
Get $50 free to trade crypto when you sign up to Bybit now
