New data from Glassnode offers a crucial dual perspective on the crypto market's current state, revealing both significant unrealized losses and sustained unrealized profits. This juxtaposition paints a nuanced picture of market stress, suggesting that while short-term pain is accumulating, the underlying structure remains robust, albeit poised for heightened volatility.
Rising Stress: The Surge in Unrealized Losses
The crypto market is witnessing a notable increase in unrealized losses, which have collectively climbed to approximately $350 billion, with Bitcoin alone accounting for about $85 billion. This surge brings total unrealized losses near their highest levels seen at any point in 2025, primarily affecting cohorts who accumulated assets late in the recent rally, particularly near the cycle top. Historically, such sharp increases in unrealized losses often precede either a capitulation event, where "weak hands" are forced to sell, or a period of expanded volatility. Compounding this stress is a widespread contraction in market liquidity, evidenced by lower stablecoin flows, reduced market-maker depth, and declining spot trading volumes, which could amplify price movements significantly.
A Nuanced View: Long-Term Holders Remain Resilient
Despite the growing unrealized losses, a look at the broader market structure reveals that unrealized profits across the ecosystem remain historically substantial, still registering in the hundreds of billions. This indicates that most long-term holders continue to sit on considerable gains, and for Bitcoin, unrealized profits still vastly outweigh losses when viewed over a two-year window. This critical divergence suggests that the market is not experiencing a broad net-loss environment; rather, the increasing losses are predominantly borne by newer entrants and those who bought at higher prices. This pattern is often observed during late-stage bull-cycle corrections or mid-cycle consolidations, where profitability is reset for some while core holders maintain their positions in the green.
What This Means for the Market Ahead
Combining these datasets, Glassnode’s analysis suggests the market is currently stressed but not structurally broken, as long-term profitability largely remains intact. The primary risk factor identified is not widespread investor insolvency, but rather the ongoing liquidity contraction. With less capital flowing and shallower market depth, even moderate buying or selling pressure can trigger outsized price reactions. Consequently, the combination of rising unrealized losses and thinning liquidity strongly indicates that a significant expansion of volatility is likely in the coming weeks. While a capitulation event for late buyers remains a possibility, potentially creating accumulation opportunities for stronger hands, the overall outlook points towards a more dynamic and potentially turbulent trading environment.
