95% Of Bitcoin Now In Profit: Why This Could Be A Signal To Sell
February 27 2024 - 10:00AM
NEWSBTC
On-chain data shows the Bitcoin supply in profit has reached levels
that led to some tops in the past, like the peak of the April 2019
rally. Bitcoin Supply In Profit Has Shot Up Following BTC’s Latest
Run As pointed out by an analyst in a CryptoQuant Quicktake post,
Bitcoin supply in profit has hit very high levels after the asset’s
latest rally. The “supply in profit” here refers to a metric that
measures the percentage of the total circulating BTC supply that’s
currently carrying some amount of unrealized gain. This indicator
works by going through the transaction history of each coin (more
precisely, each UTXO) on the blockchain to see what price it was
last moved at. Assuming that the previous transfer of the coin was
the last time it changed hands, the price at that instance would
act as its current cost basis. Related Reading: Ethereum Leaves
Bitcoin Behind, But Is This Rally Sustainable? As such, if the
previous transfer price for any coin was less than the spot value
of the cryptocurrency right now, then that particular coin would be
holding a profit currently. The supply in profit sums up all such
coins and calculates what percentage of the total supply they make
up for. A counterpart indicator called the “supply in loss” does
the same for coins of the opposite type (that is, those with a cost
basis lower than the current price). This metric’s value can also
simply be found by subtracting the supply in profit from 100 (since
the total supply must add up to 100%). Now, here is a chart that
shows the trend in the Bitcoin supply in profit over the past few
years: The value of the metric seems to have been going up in
recent days | Source: CryptoQuant As displayed in the above graph,
the Bitcoin supply in profit has naturally shot up recently as the
asset’s price has gone through its rally. After the latest
continuation of the run towards the $57,000 level, the metric has
hit the 95% mark. This means that 95% of all UTXOs in existence is
carrying a profit at the moment. This may not entirely be a
positive thing, however, if history is anything to go by. As the
quant has highlighted in the chart, the BTC rally that started in
April 2019 topped out just as the supply in profit hit the same
high levels as right now. Similarly, the local top in 2020 at the
beginning of the last bull market also coincided with these levels.
The reason behind this pattern is likely to be the fact that
investors in profit are more likely to sell their coins at any
point. Thus, when a large percentage of holders are carrying gains,
the probability of a mass selloff can spike up. Related Reading:
XRP Forms Buy Signal, Analyst Predicts Surge To This Target That
said, in the 2017 and 2021 bull runs, as well as during the
November 2021 peak, the indicator did manage to surpass these
levels for a while before the top was encountered. As such, it
remains to be seen if the current rally is similar to the likes of
the April 2019 run, in which case a top might be hit here, or if
it’s a proper bull run, meaning that there might still be a while
to go before the peak. BTC Price At the time of writing, Bitcoin is
trading around the $56,500 level, up 8% over the past week. Looks
like the price of the asset has enjoyed a sharp rally today |
Source: BTCUSD on TradingView Featured image from Kanchanara on
Unsplash.com, CryptoQuant.com, chart from TradingView.com
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