40% of Bitcoin Holders Are Underwater — Is a 2022-Style Bear Market Returning?

Bitcoin is under mounting pressure in 2026, and the numbers behind the pain are becoming harder to ignore. With roughly 40% of the circulating supply now held at a loss, analysts and on-chain data firms are drawing uncomfortable comparisons to the brutal bear market of 2022 — one that wiped out more than 75% of Bitcoin’s value over the course of a year. The question now dividing the crypto community is whether the current downturn is a temporary reset or the beginning of something much deeper.

The Scale of the Losses

Bitcoin recently traded near $73,469, down more than 31% over the past year, following a steep decline from its late-2025 peak above $120,000. That peak, reached in October 2025, now feels like a distant memory for many holders who bought in near the top.

On-chain analyst “Darkfost” put the situation in plain terms: at prices around $73,700, roughly 40% of the total Bitcoin supply was acquired at higher levels and is currently held at a loss. That means nearly half of all coins in circulation are underwater — a figure that hasn’t been seen at this scale since the depths of the last bear market.

Glassnode has assessed the current situation as comparable to the market structure seen in the second quarter of 2022, noting that offsetting losses of this magnitude typically requires a transfer of assets from investors sitting on losses to new buyers entering at lower price levels. Long-term investors — those holding for more than 155 days — have seen their daily realized losses climb to $200 million, which Glassnode characterizes as confirmation of active stop-loss selling.

Around 40% of the BTC supply is at a loss within the current range-bound market structure. (Source: Darkfost)

Whale Accumulation Has Reversed

Perhaps more alarming than retail losses is what is happening at the top of the market. CryptoQuant, one of the most closely watched on-chain analytics firms, released a report highlighting a troubling shift in behavior among Bitcoin’s largest holders.

Annual balance growth for whale accounts — those holding between 1,000 and 10,000 BTC — has turned negative in the fastest contraction seen this year. Monthly balance growth has been flat since February, suggesting a shift from accumulation toward mild distribution. CryptoQuant described this pattern as mirroring the early stages of the 2022 bear market.

Meanwhile, “dolphin” accounts holding between 100 and 1,000 BTC — a category dominated by exchange-traded funds and corporate treasuries — are still growing in annual terms, but momentum has stalled sharply. Monthly balance growth is near zero across both cohorts, with dolphin balances printing successive lower highs since September 2025. Historically, CryptoQuant notes, these periods have preceded sustained price weakness.

A Monthly Close That Could Define the Narrative

The market is now watching May’s monthly close with unusual intensity. Analysts at Rand Group flagged that Bitcoin has never posted three consecutive green monthly closes during a bear market — and after January and February finished in the red, followed by green closes in March and April, May’s outcome carries significant weight.

A red monthly close for May would strengthen the view that the recent bounce was losing momentum and lend further support to the bear-market comparison. With BTC still slightly negative on the month heading into the final days of May, the outcome remains uncertain.

Bitcoin (BTC) Price Chart (Source: CoinMarketCap)

Is This 2022 All Over Again?

The last full bear market ran from November 2021 to November 2022 — a 12-to-14-month cycle that produced a 77% drawdown from peak to trough. The current cycle, now roughly seven months in from Bitcoin’s October 2025 high, has already seen a 40–50% drawdown, with on-chain indicators at what some analysts describe as capitulation levels. 

CryptoQuant first pointed to bear market conditions as early as December 2025, citing buyer exhaustion and noting the drop was comparable to March 2022, when crypto markets entered a sustained downturn. Bitcoin ultimately finished 2025 in the red — only the fourth time in its history it has done so.

However, analysts are not uniformly bearish. HashKey Group researcher Tim Sun told Cointelegraph that while the highest proportion of supply in unrealized loss recently approached 50% — the worst reading since the 2022 bear market bottom — a more realistic floor could be found in the $55,000–$60,000 range, provided geopolitical tensions do not escalate further and the Federal Reserve does not resume rate hikes.

Analysts at XTB note that as long as Bitcoin trades below $90,000, sellers retain the structural advantage, with a potential bear-market bottom possible in Q4 2026 — a timeline consistent with the historic four-year halving cycle.

How Long Does a Crypto Bear Market Last? (Source: Kucoin)

What Sets 2026 Apart

The current episode differs from 2022 in one critical respect: the 2022 collapse was driven by a cascade of structural failures — leveraged lenders, collapsed algorithmic stablecoins, and exchange insolvencies. The 2026 downturn, by contrast, appears rooted in macro uncertainty, excess leverage being flushed out, and fading post-halving momentum.

Most institutional voices — including CryptoQuant, Compass Point, and Pantera — expect the bear phase to resolve in 2026, with a bottom likely in the $56,000–$68,000 zone and recovery later in the year or into 2027. Structural tailwinds such as institutional adoption, ETF infrastructure, and tokenization are seen as still intact.

For now, Bitcoin finds itself caught between two competing narratives. One camp sees the current weakness as confirmation that the cycle has peaked and a deeper reset lies ahead. The other views it as a painful but necessary purge of excess speculation before the next leg higher.

What both sides agree on: the $70,000–$73,000 range is the line in the sand. If it breaks, the bear case becomes significantly harder to argue against.