NEW YORK (BLOOMBERG) - More crypto traders are finding their Bitcoin investments underwater and may be ready to throw in the towel.

The number of anonymous Bitcoin addresses in the money, meaning those who acquired their holdings at prices below the current day's, has reached lows not seen since March of 2020, according to Bequant, a digital asset firm. The level, currently hovering at around 51 per cent, "points to capitulation", although bear markets in 2015 and 2018 saw even lower lows, wrote its analysts in a note.

Crypto prices have been in a slump this year as the Federal Reserve withdraws stimulus and hikes interest rates to combat inflation. The environment has been toxic for all manner of riskier assets, including richly valued tech companies.

But cryptocurrencies have been hit particularly hard, with Bitcoin losing more than a third of its value this year, and others, including Ether, shedding 50 per cent. Even Bitcoin miners have started to offload tokens they had hoarded as many are seeing few signs that prices could recover soon.

"It feels very much to me like crypto is also subject to a lot of the monetary cycle that has been hitting the more traditional asset classes," Ms Kara Murphy, chief investment officer of Kestra Holdings, said. "Looking at the rapid increase in crypto prices, it seems clear that they really benefited from easy money policies, and now that the money is coming out of the system, that is a good part of the reason why crypto is declining more recently."

In its second consecutive session lower, Bitcoin fell as much as 4.8 per cent on Wednesday to trade at around US$29,800.

To be sure, it is unlikely that a lot of crypto "OGs", meaning those who bought early on at very low price levels, are dumping their holdings, said Mr Wilfred Daye, chief executive officer of Securitize Capital, a digital asset management firm. But those who bought in recent months might be more likely to sell.

"There may be capitulation because larger institutional players, guys who got in during the current cycle, are at risk of selling their assets and liquidating their assets," Mr Daye said. "(For) this particular cycle that started in late 2020, you had a lot of institutional folks getting in at a higher price, so I think it is more institutional capitulation."

Sentiment remains sour still. The Bitcoin put-to-call ratio hit a recent high of 0.75 last week, according to Skew data compiled by Babel Finance. This indicates that traders are aiming for price protection or looking to profit from Bitcoin's price decline.