Bitcoin's Loss Realization Break Below 1: Warning of a Six-Month Downtrend

• Bitcoin's realized profit/loss (P/L) ratio fell below 1 for the first time since 2022.
• On‑chain history ties a sub‑1 ratio to at least six months of net loss realization.
• MVRV pricing bands flag an "extreme low" near $44,000, aligning with the $40k‑$50k bottom corridor.
• Sector spill‑over could pressure crypto‑linked equities and ETFs.
• Strategic positioning now can safeguard against a protracted bear or capture the upside if a reversal emerges.

You’re probably underestimating the next six months of Bitcoin pain.

The 90‑day moving average of Bitcoin’s realized profit/loss ratio—an on‑chain metric that compares the price at which coins were last moved to their current market price—has slipped beneath the critical threshold of 1. When the ratio stays below 1, holders are consistently selling at a loss, a behavioral pattern that historically precedes extended capitulation cycles. Glassnode’s long‑term data shows that each time the ratio breached this line, Bitcoin endured a minimum of five to six months of net loss realization before any meaningful recovery took hold.

Why Bitcoin's Realized P/L Ratio Dropping Below 1 Signals Extended Capitulation

The realized P/L ratio is a leading indicator because it aggregates the profit‑or‑loss status of every Bitcoin that changes hands. A ratio above 1 means the majority of moved coins are in profit, creating a natural ceiling for upside—sellers are reluctant to exit winners. Conversely, a ratio below 1 indicates that sellers are forced or willing to liquidate at a loss, often due to margin calls, liquidity squeezes, or a broader risk‑off environment. The current dip below 1 reflects heightened margin pressure across leveraged platforms and a growing appetite for cash amid tightening global monetary conditions.

From a technical standpoint, the sub‑1 reading aligns with a breach of the 200‑day moving average and a descending trendline that has held since early 2023. Coupled with a widening bearish divergence on the Relative Strength Index (RSI), the market structure reinforces the narrative of a deepening downtrend.

Bitcoin’s 2022 and 2018 Bear Market Parallels

History provides a stark reminder. In the 2022 bear market, Bitcoin’s realized P/L ratio fell below 1 in March, and within six months the price slumped an additional 25%. The 2018 cycle was even harsher: a sub‑1 ratio in November 2017 preceded a 50%+ plunge over the next five months. Both episodes featured a rapid shift from “loss‑realization regime” to “excess loss‑realization regime,” a term coined by on‑chain analysts to describe periods when loss‑taking dominates market sentiment.

These patterns are not coincidental. They reflect the psychology of leveraged participants and the feedback loop created when margin‑call liquidations force distressed holders to sell, pushing prices lower and triggering further liquidations. The current environment mirrors those dynamics: rising interest rates, tightening credit, and heightened regulatory scrutiny have amplified risk aversion across crypto markets.

Bitcoin’s MVRV Pricing Bands and the $44K Bottom Forecast

The Market-Value‑to‑Realized‑Value (MVRV) pricing bands map Bitcoin’s unrealized profit and loss zones. When the price dips into the “extreme low” band—the blue line on the MVRV chart—previous bear market bottoms have materialized. As of February, that band sits near $43,760, suggesting a natural support zone around $44,000 if the downtrend persists.

That range dovetails with analysts who have earmarked a $40,000‑$50,000 corridor as the likely late‑2026 bottom. The confluence of on‑chain stress signals and traditional technical support makes this band a focal point for both short‑term traders and long‑term allocators.

Bitcoin’s Sector Ripple Effects on Crypto‑Related Equities

Bitcoin’s trajectory does not exist in isolation. Crypto‑focused equities—such as publicly listed mining firms, blockchain infrastructure providers, and ETFs that hold Bitcoin futures—track the leading‑coin’s sentiment. A prolonged sub‑1 ratio can depress hash‑rate profitability, erode mining margins, and pressure the stock prices of companies like Marathon Digital and Riot Platforms.

Meanwhile, competing digital assets like Ethereum may experience a relative inflow as risk‑averse investors seek lower‑volatility exposure within the crypto space. However, the broader “risk‑off” climate can also throttle demand for all speculative crypto assets, tightening capital across the sector.

Institutional players with exposure via custodial services or crypto‑derivative desks may adjust their risk parameters, potentially reducing on‑balance‑sheet exposure and widening bid‑ask spreads—a micro‑structural factor that can further depress price efficiency.

Investor Playbook: Bitcoin Bull and Bear Cases

Bull Case (Recovery Trigger)

• A decisive break above the $44,000 MVRV low accompanied by a realized P/L ratio rebound above 1.
• Improved macro liquidity from central banks easing rate hikes, rekindling risk appetite.
• Regulatory clarity that removes uncertainty around institutional custody and ETF approvals.
• Technical bounce off the 200‑day moving average with bullish divergence on RSI and MACD.

If three of these catalysts align, Bitcoin could retest the $55,000‑$60,000 zone by early 2025, offering a compelling entry point for long‑term holders.

Bear Case (Extended Capitulation)

• Realized P/L ratio remains below 1 for the next six months, indicating persistent loss‑realization pressure.
• Continued macro‑economic tightening, leading to higher funding rates on crypto futures.
• Escalating regulatory actions that restrict on‑ramps for retail investors.
• Further breaches of key technical supports (below $40,000 and the 200‑day MA).

In this scenario, Bitcoin could slide toward $35,000‑$38,000, testing the lower bound of the $30,000‑$40,000 historical panic zone. Investors should consider defensive positioning: reduce leveraged exposure, increase cash reserves, or hedge via Bitcoin futures contracts.

Regardless of the path, the on‑chain warning signs are loud and clear. Monitoring the realized profit/loss ratio and MVRV bands will give you the earliest clues whether the market is gearing up for a prolonged bear or a potential reversal. Stay disciplined, keep an eye on macro catalysts, and adjust your portfolio accordingly.