40% of Bitcoin holders are in the red: Is a 2022-style bear run returning?

For now, the chances of a 2022-style bear market cannot be fully dismissed. Technically, Bitcoin has already fallen more than 16%, and the market is only midway through Q2. That said, the current price action still looks very different from what unfolded in 2022. Despite the recent wave of FUD, BTC remains up more than 7% this quarter, compared with the brutal 56% drop recorded in Q2 2022.  Analysts within the CoinMarketCap community also support this view. They argue that the market is taking Bitcoin's recent 40% underwater supply figure out of context. According to one analyst, a large portion of these underwater holdings belongs to investors who entered through U.S. Spot Bitcoin ETFs at an average cost basis of around $83,400.  However, recent macro pressures, including sticky inflation, have pushed many of these investors into unrealized losses. More importantly, long-term holders are acting very differently than they did in 2022.  According to the analysts, long-term holder supply has risen to a record 15.8 million BTC, signaling strong conviction despite the pullback. Instead of selling into weakness, many continue to accumulate, suggesting that institutional selling pressure is weighing on Bitcoin [BTC] more than any widespread drop in confidence.  This creates a clear divergence from the 2022 bear market. Back then, confidence across the crypto sector steadily eroded, triggering widespread selling from both short-term and long-term holders. The real question now is whether this conviction can last through the rest of 2026. Bitcoin's 2022 divergence faces a new test As discussed earlier, conviction remains the main factor separating Bitcoin from the 2022 bear market.  For context, Bitcoin finished 2022 down roughly 65%, capping off one of the most painful years in the asset's history. While a repeat of that cycle still looks unlikely, recent market developments have brought the bear-market debate back into focus and started testing that conviction once again. A large part of Bitcoin's resilience in recent months has come from expectations of a more crypto-friendly regulatory environment. However, that narrative took a hit after the SEC withdrew the “innovation exemption” for tokenized stocks. In response, prediction markets sharply lowered the odds of the CLARITY Act becoming law, with probabilities dropping from a peak of 75% to around 56%. Making matters worse, Senator Cynthia Lummis recently warned that if lawmakers miss this legislative window, the bill may not resurface until 2030.  For a market that has heavily priced in regulatory progress, such a delay could put even more pressure on investor conviction. Meanwhile, uncertainty around rate cuts continues to linger.  With both macro and regulatory tailwinds looking less certain than they did a few months ago, expecting long-term holder conviction to remain intact for the rest of the year may be overly optimistic. If that conviction starts to crack, comparisons to 2022 may become harder to ignore.  Final Summary Bitcoin's 40% underwater supply does not automatically signal a 2022-style bear market, as long-term holders continue to accumulate rather than sell. However, weaker regulatory hopes and ongoing macro uncertainty could pressure investor conviction.