Bitcoin is tanking – the kind of tanking where it’s down 21% over the last week. And with BTC at $53,000, the inscription / ordinals market is down. Bad. In today’s newsletter, co-written by DataMonke, we look at realized profits and losses from the inscription market to show just how bad.
The good: net realized profit for ordinals
The first chart shows net realized profit, which shows sellers who bought at X and sold at X+Y, where if Y > X, then they sold their inscription for a gain and profited from the trade. If an inscription was purchased at 0.1btc and sold for 0.2btc we consider that trade to have a 0.1btc net realized profit. We only count realized profit when a trade occurs – we don’t account for unrealized profit, where a trader’s inscription gains value but they do not sell.
Inscription traders enjoyed significant gains in March 2024, a time when ordinal airdrops were at their peak (driven by pre-Runes collections) and Bitcoin’s price was at all-time highs. Daily cumulative gains of over 100 BTC realized profit were common during the months of January, February, and March 2024.
The bad: net realized loss for ordinals
The opposite of realized gain, net realized loss tracks a loss on an inscription sale. If a trader bought at 0.1btc and sold for 0.05btc, the realized loss is 0.05btc.
Net realized losses for inscription traders were greatest during late May & early June. This peak in realized losses followed the greatest overall decline in the total capitalization of the inscription market as many traders exited their positions. Perhaps an indicator of the market’s downturn, the Runes token standard experienced lackluster trading after launch.
Now that said, the Runes market did ok in May, but the large net losses for ordinals traders came from folks who sold their inscriptions to chase the anticipated Runes run (which didn’t really materialize).
There are more gains than losses in the ordinals market…but what if we look at unrealized?
Combining the two charts, we can see that the realized losses barely show up on the aggregate chart view. This is because there is at least 1 order of magnitude difference between the average realized loss vs the average realized gain.
This means two (interconnected) things:
1) The Ordinals ecosystem is full of bagholders:
Ordinals holders are unwilling to sell their JPEGs at a loss. Some might call this diamond hands, others call this conviction – some still might call it desperation.
2) There are no buyers on the other side to even complete the realized loss:
The most troublesome – and likely theory – for why inscription holders have not experienced realized losses: the market is illiquid. These are non-fungible assets after all, and recently there just haven’t been buyers at any level, so buyers and sellers have chewed through floor prices.
But look on the bright side, you could be down worse as an ETH or Solana NFT bagholder 🙂
Once again, a special thanks to DataMonke who has been dropping the best proprietary collection charts in the Ordinals ecosystem.
