Examining the Liquid Supply

Recent on-chain data from Glassnode indicated that Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) have reached record levels of supply being held at a loss. While these figures might seem alarming, a deeper analysis reveals that the actual selling pressure is likely much lower than the raw percentages imply.

The discrepancy comes from a failure to account for locked supply, institutional holdings, and assets held in staking. For Ethereum and Solana, in particular, a substantial portion of the supply held at a loss isn’t liquid. Over 40% of ETH and more than 75% of SOL in this category are locked in staking contracts, Exchange-Traded Funds (ETFs), or strategic reserves, making them unavailable for immediate sale.

Bitcoin’s situation shows a similar pattern. Although 35% of its supply is technically held at a loss—a level not seen since its price was around $27,000—this number is inflated. When factoring in institutional holdings and the significant amount of permanently lost BTC, the true liquid portion of the supply under pressure shrinks considerably.

A Metric of Price Velocity, Not Panic

The supply-at-loss metric is also highly sensitive to rapid price movements rather than being a pure indicator of investor capitulation. For instance, when Solana’s price fell to $121, its supply held at a loss approached 80%. This is the same level it reached when the price was near $20, which demonstrates how quickly the metric can change based on price velocity alone.

For both ETH and SOL, the large volume of staked coins means that the supply-at-loss metric tends to drop sharply during market uptrends. This makes sudden spikes in the metric more reflective of short-term price action than a fundamental shift in holder sentiment.

Ultimately, the raw loss percentages for all three assets overstate the potential for a market sell-off. Once illiquid factors like locked supply and lost coins are considered, the true at-risk supply is far more contained than headline figures suggest.

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