A recent surge in the Bitcoin Impact Index indicates renewed financial stress in the cryptocurrency market, as fresh data reveals that almost half of all Bitcoins in circulation are now trading below their acquisition cost. The index, which monitors on-chain flows alongside ETF and derivatives activity and overall market liquidity, serves as a barometer for investor sentiment and risk. The sharp increase observed during the last week of March suggests that market turbulence has returned.
Investor behavior shifts alongside mounting financial stress
The index recorded a 13-point leap to reach 57.4, marking one of the most significant upticks since measurements began. This elevated position has historically signaled the approach of broad-based sell-offs and double-digit price declines, similar to those seen in 2018, 2022, and earlier this year. According to a report by CEX.IO, investor positioning has entered a riskier phase that could potentially foreshadow further market challenges.
Just weeks ago, Bitcoin was trading well above $70,000, providing long-term investors—those holding coins for over six months—substantial paper profits. However, the recent wave of selling pushed approximately 4.6 million Bitcoins in these long-term wallets, accounting for roughly 30% of all Bitcoin, below their purchase price. Losses among this group last week reached levels unseen since 2023, underscoring the growing strain on seasoned holders.
Historically, divergences between price action of this scale and on-chain trends have served as warnings. In both mid-2018 and mid-2022, similar patterns preceded price drops exceeding 25 percent, analysts highlighted.
Short-term holders face losses as capital outflows accelerate
Not only long-term investors are feeling the pinch—short-term traders are also experiencing deepening losses. Currently, 47% of the total Bitcoin supply, or nearly one out of every two Bitcoins in circulation, is priced below its last purchase cost. This ratio, last seen during the market’s most stressful period in February, has resurfaced, highlighting broad-based pain for holders across different time horizons.
The report further notes that capital flows, which previously helped stabilize the market, have reversed direction. While daily net inflows of stablecoins averaged $250 million in February and March, recent days have seen net outflows surge to $292 million. Exchange-traded funds (ETFs) and Bitcoin miners—once accumulating—have also joined in by selling portions of their holdings.
Despite these pressures, on-chain metrics reveal that investors are not moving their crypto en masse to exchanges—a behavior commonly seen on the eve of panic-driven sell-offs. Historically, mass transfers to exchanges served as precursors to heightened volatility and cascading liquidations. So far, such movements are absent, offering a measure of reassurance for now.
