Bitcoin Profitability Drops Amidst Correction, Signaling Bullish Opportunity

Following the recent Bitcoin price crash, on-chain data reveals a significant decline in the supply of Bitcoin held in profit. The "Percent Supply in Profit" indicator, which tracks the percentage of circulating Bitcoin holding an unrealized gain, has dropped to around 90%, indicating that approximately 10% of the supply is currently at a loss.

Bitcoin Profitability Plunges Amidst Market Downturn, Signaling Potential Bullish Respite

As Bitcoin's price underwent a significant correction towards the $65,000 level, on-chain data reveals a stark decline in the supply held in profit, indicating a potential shift in investor sentiment.

Supply in Profit Drops Sharply

According to analyst James Van Straten, approximately 10% of Bitcoin's circulating supply is now at a loss. The indicator used to gauge this, the "Percent Supply in Profit," tracks the percentage of the total supply holding an unrealized gain.

This metric calculates the cost basis of each coin by examining its transaction history on the blockchain. The coins with a cost basis below the current spot price are considered in profit and contribute to the Percent Supply in Profit.

Chart Analysis

A chart depicting the trend in Bitcoin's Percent Supply in Profit over recent months shows a precipitous drop in the metric's value. This decline coincides with the cryptocurrency's price correction.

The indicator has reached the 90% mark, indicating that about 10% of the supply is currently incurring a loss. Notably, the last time the metric dipped to this level was on March 22nd, which also marked the asset's previous market bottom.

Implications for Market Dynamics

Historically, high levels of Percent Supply in Profit have often foreshadowed market tops, as investors in the green are more likely to sell their holdings. Conversely, bottoms tend to emerge when profitability levels drop, indicating diminished selling pressure.

The current value of 90% remains relatively high but is not uncommon during bull runs characterized by strong demand and the pursuit of new all-time highs.

Bullish Outlook

The recent cooling-off in profitability may provide constructive support for the continuation of the rally, similar to what occurred last month. As investor profitability levels normalize, the likelihood of a mass selloff diminishes, allowing the rally to potentially extend its momentum.

Price Movement

At the time of writing, Bitcoin trades around $65,700, a decline of over 5% over the past week. The asset's price has been on a downward trajectory in recent days.

Conclusion

The plunge in Bitcoin's Percent Supply in Profit suggests a shift in investor sentiment, with a higher proportion of the supply entering a state of loss. While the metric remains elevated, its recent decline may indicate a potential tailwind for the continuation of the bullish trend, echoing the market behavior observed in March. Nonetheless, investors should exercise caution and conduct thorough due diligence before making any investment decisions.