New data from Glassnode indicates that unrealized losses across the crypto market have climbed to roughly $350 billion, with Bitcoin accounting for around $85 billion of that total.
Combined with multiple liquidity indicators pointing sharply lower, the market appears to be entering a heightened-volatility phase that could shape price action into early 2026.
But a second dataset, unrealized profits across the ecosystem, paints a more nuanced picture of investor positioning.
Unrealized losses spike — and signal growing market stress
The unrealized-loss heatmap indicates a broad rise in red bands across assets, suggesting that more wallets are now holding underwater positions compared to recent months.
Total unrealized losses are now near the highest levels seen at any point in 2025.
Source: Glassnode
For Bitcoin specifically, the chart shows:
- Losses have risen sharply as BTC pulled back from the $120k region
- BTC’s segment of unrealized losses [$85B] is heavy for an asset with deep liquidity
- Losses are concentrated in cohorts who accumulated late in the rally, especially near the cycle top
Historically, sharp increases in unrealized losses tend to coincide with either:
- Capitulation risk, when weak hands are forced out, or
- Volatility expansions, as compressed liquidity amplifies price reactions.
Glassnode notes that liquidity across the board is thinning — a combination of lower stablecoin flows, reduced market-maker depth, and declining spot volumes on major exchanges.
But the unrealized-profit chart shows the bigger structural context
When viewed alongside the unrealized-profit dataset, a different layer of market structure emerges.
Source: Glassnode
Across the ecosystem:
- Unrealized profits remain historically large, still in the hundreds of billions
- Most long-term holders continue to sit on substantial gains
- Profit levels retraced from 2025’s peak but remain well above early-cycle norms
For Bitcoin, unrealized profits are still vastly greater than unrealized losses when zoomed out to the two-year window. This means:
- The market is not in a broad net-loss environment
- Long-term holders remain significantly in the green
- The increasing unrealized losses are driven primarily by newer entrants and high-price buyers, rather than a systemic break in holder profitability
This divergence — surging losses but still-large profits — is typical in late-stage bull-cycle corrections or mid-cycle consolidations.
What this tells us about the real state of the crypto market
Putting both charts together:
1. The market is stressed, but not structurally broken
Rising losses reflect short-term pain and thinning liquidity, but long-term profitability remains intact. Historically, markets only enter deep structural distress when unrealized losses outweigh profits — which is not the case today.
2. Liquidity contraction is the main risk, not investor insolvency
The key problem is falling liquidity, not large-scale underwater holders. With liquidity drying up, even moderate buy/sell pressure can create outsized volatility.
3. Volatility is likely to expand in the coming weeks
As Glassnode highlighted, the combination of rising losses + shrinking liquidity has preceded major volatility expansions in previous cycles.
4. A capitulation event is possible — but not guaranteed
Current conditions resemble previous setups where:
- Late buyers capitulated
- Strong hands accumulated
- Markets later recovered as liquidity returned
However, if macro tightening resumes or crypto-specific shocks emerge, the losses could deepen before stabilizing.
Final Thoughts
- Unrealized losses are rising sharply, but unrealized profits remain dominant — suggesting stress rather than breakdown.
- With liquidity thinning, traders should prepare for a higher-volatility environment and sharper intraday swings.