New data from Glassnode indicates that unrealized losses in the crypto market have risen to around $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 phase of increased volatility that could impact price action through early 2026.
But a second data set, unrealized profits across the ecosystem, paints a more nuanced picture of investor positioning.
Unrealized losses are increasing – and indicate increasing tension in the market
The heatmap of unrealized losses indicates a broad increase in red bands across all assets, indicating more wallets are now taking underwater positions compared to recent months.
Total unrealized losses are now close to all-time highs in 2025.
Source: Glassnode
Specific to Bitcoin, the graph shows:
- Losses have surged as BTC retreated from the $120,000 region
- BTC’s segment of unrealized losses [$85B] is heavy for an asset with high liquidity
- The losses are concentrated in cohorts that piled up late in the rally, especially near the cycle top
Historically, sharp increases in unrealized losses tend to coincide with:
- Capitulation riskwhen weak hands are forced out, or
- Volatility extensionsas compressed liquidity amplifies price reactions.
Glass junction notes that liquidity is declining across the board – a combination of lower stablecoin flows, reduced market maker depth and declining spot volumes on major exchanges.
But the unrealized gains graph shows the larger structural context
When viewed alongside the unrealized profit data set, another layer of market structure emerges.
Source: Glassnode
Throughout the ecosystem:
- Unrealized profits remain historically high, still in the hundreds of billions
- Most long-term owners continue to expect significant gains
- Earnings levels have returned from the 2025 peak but remain well above early cycle norms
For Bitcoin, the unrealized gains are still much larger than the unrealized losses when we zoom out to the two-year time frame. This means:
- The market is not in a broad net loss environment
- Long-term holders remain significantly in the green
- The rising unrealized losses are mainly driven by new entrants and high-priced buyers, rather than a systemic break in holders’ profitability
This divergence – mounting losses but still big gains – is typical of late-stage bull cycle corrections or mid-cycle consolidations.
What this tells us about the true state of the crypto market
To merge both graphs:
1. The market is under pressure, but is not structurally broken
The mounting losses reflect short-term pain and declining liquidity, but long-term profitability remains intact. Historically, markets only get into deep structural trouble when unrealized losses exceed gains – which is not the case today.
2. Liquidity contraction is the biggest risk, not investor insolvency
The main problem is declining liquidity, not large-scale underwater holders. With liquidity drying up, even moderate buying/selling pressure can cause excessive volatility.
3. Volatility is likely to increase in the coming weeks
As Glassnode highlighted, the combination of rising losses + declining liquidity has preceded major volatility expansions in previous cycles.
4. A capitulation event is possible – but not guaranteed
The current conditions resemble previous setups where:
- Late buyers capitulated
- Strong hands gathered
- Markets later recovered as liquidity returned
However, if macroeconomic tightening resumes or crypto-specific shocks occur, losses could widen before stabilizing.
Final thoughts
- Unrealized losses increase sharply, but unrealized gains remain dominant, indicating stress rather than slump.
- As liquidity tightens, traders should prepare for an environment of higher volatility and sharper intraday swings.