Bitcoin Supply In Profit Down To 81% After Market Crash

On-chain data shows that Bitcoin’s supply has taken a big hit following the recent cryptocurrency crash.

Profitable Bitcoin supply falls by around 81% during crash

As CryptoQuant Quicktake analyst explained: postThe recent cryptocurrency sell-off has led to some of the supply being submerged.

The relevant on-chain metric here is “Supply in Profit”, which, as the name suggests, measures the percentage of unrealized profits out of the total supply of Bitcoin currently in circulation.

This indicator works by looking at the transaction history of each coin in circulation to find the price it last moved at. Assuming this last transaction was the last time the coin changed hands, the price at that time will give you an idea of ​​its current cost basis.

So if the current spot price of a cryptocurrency is higher than this cost price, the coin can be considered to be currently holding some profit. The profit supply is calculated by adding up all coins that meet this condition and calculating what percentage of the supply they make up.

Naturally, the opposite metric, called “losing supply,” tracks the remaining coins. Since total supply needs to add up to 100%, the value of this latter metric is also easy to find by subtracting gain supply from 100.

Well, here is a chart showing the trend of these two metrics for Bitcoin over the last few years.

Looks like the Supply in Profit has been going down in recent days | Source: CryptoQuant

As shown in the graph above, Bitcoin’s supply profits have recorded a steep decline in line with the drawdown the asset’s price has recently experienced.

At the lowest point of this crash, Bitcoin briefly dipped below $60,000, with profit supply falling by around 81% and loss supply rising by 19% at the same time.

“Right now, everything seems to be going normally and the retracement is following the normal pattern,” the quant noted. “If the price drops a bit further, I expect the profit margin to drop to the 70-76% range.”

So how does this metric relate to cryptocurrency prices? Statistically, investors with profits are more likely to sell than those with losses, so a large number of holders with profits increases the likelihood of a mass sell-off in the market.

For this reason, a cooling in profit supply suggests that there are fewer potential sellers, which could actually be a positive development for the cryptocurrency.

Currently, Bitcoin indicator values ​​are still relatively high, but it should be noted that during bull markets, indicators usually tend to remain near higher levels, so a drop of the current magnitude could be enough for the asset to hit a bottom.

For example, the May low also occurred in tandem with similar levels of profit provision. It remains to be seen whether the latest reading of this indicator will lead to a new bottom for the cryptocurrency.

BTC Price

After plummeting below $60,000, Bitcoin has bounced back slightly and is now above $61,000.

Bitcoin Price Chart

The price of the coin appears to have gone through a plunge over the last couple of days | Source: BTCUSD on TradingView

Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com

Related Article

0 Comments

Leave a Comment