Bitcoin Profitable Supply Plummets, Signaling Market Plunge

The cryptocurrency market has experienced a significant decline, with Bitcoin's profitable supply dropping to around 90%. This indicates that 10% of the Bitcoin supply is currently operating at a loss, a level last seen during a market downturn in late March. The Percent Supply in Profit metric measures the percentage of Bitcoin supply with unrealized gains, and typically precedes market tops when profitability is high. Conversely, when profitability declines, as it has recently, it may signal potential market bottoms. Despite the current drop in profitability, Bitcoin remains relatively high at 90%, suggesting the rally could potentially continue.

Bitcoin Market Plunges, With 10% of Supply Facing Losses

The cryptocurrency market has witnessed a dramatic shift in recent weeks, with the flagship currency Bitcoin experiencing a significant decline in its profitable supply. This has coincided with a sharp drop in the value of Bitcoin, which has now fallen to around $65,000.

Renowned data analyst James Van Straten has highlighted that approximately 10% of Bitcoin's circulating supply is now facing a state of loss, a stark indicator of the current market sentiment. The key on-chain metric that tracks this profitability is the "Percent Supply in Profit," which measures the percentage of Bitcoin supply that is currently holding an unrealized gain.

Methodology Behind Percent Supply in Profit

This metric is derived by meticulously examining the historical transaction data of all Bitcoin coins in circulation. It assumes that each transaction represents a change in ownership, allowing the last sale price to be used as the cost basis for each coin.

Profitability is then determined by comparing the current spot price of Bitcoin to the cost basis of each coin. If a coin's cost basis is below the current Bitcoin price, it is considered to be in a profitable position. The Percent Supply in Profit aggregates all such coins and calculates their ratio relative to the total Bitcoin supply.

Recent Decline in Percent Supply in Profit

A recently released graph shows a precipitous decline in the Bitcoin Percent Supply in Profit over the past few months. The indicator has plummeted to approximately 90%, reflecting the substantial setback in cryptocurrency prices. This indicates that around 10% of Bitcoin's supply is currently operating at a loss.

Interestingly, the last time such low levels were observed was in late March, when Bitcoin reached its recent low point. Earlier records had shown the Percent Supply in Profit climbing toward 100%, indicating a new all-time high (ATH) due to elevated prices, with the supply firmly positioned out of the red.

Implications for Bitcoin Price

Within the cryptocurrency market, a general rule of thumb is that investors with strong profit positions are more likely to sell their coins, potentially triggering a sell-off if a significant number of investors realize their profits. This explains why the Percent Supply in Profit tends to reach peaks during periods of high profitability.

Conversely, markets are more likely to bottom out when investor profitability declines. While the current profitability rate of 90% is still relatively high, it is not uncommon during periods of high demand and exploration of ATHs. The recent cooling of profitability compared to previous levels provides a positive indication that the rally may be able to continue, as it did in the previous month.

Current Bitcoin Price Dynamics

As of the time of this report, Bitcoin is trading at approximately $65,700, down over 5% from the previous week. A close examination of the Bitcoin trading landscape reveals that the price of this popular virtual asset has been on a steady decline over the last few days.