Bitcoin Supply in Profit Nosedives to 90%, Signaling Potential Bear Market Bottom

Bitcoin Supply in Profit Plummets to 90%, Signaling Potential Bottom

On-chain analysis reveals a significant decline in the Bitcoin supply in profit following the recent price crash that saw the asset dip below the $65,000 mark. As analyst James Van Straten observed, approximately 10% of the BTC supply is now incurring losses.

Measuring Supply Profitability through "Percent Supply in Profit"

The "Percent Supply in Profit" indicator monitors the percentage of the total circulating Bitcoin supply holding an unrealized gain. By examining the blockchain history of each circulating coin, the metric determines the price at which it was last transferred. This price is considered the cost basis for the coin, assuming a change of ownership in the transaction.

Coins with a cost basis below the current spot price are deemed profitable, while those above are considered in loss. The Percent Supply in Profit tallies all profitable coins to calculate their proportion of the total supply. Conversely, the Percent Supply in Loss captures coins not meeting this criterion.

Sharp Decline in Bitcoin Profitability

The following chart illustrates the recent trend in Bitcoin's Percent Supply in Profit:

[Insert Chart from NewsBTC]

As evident from the chart, the Percent Supply in Profit has plummeted significantly as the cryptocurrency's price has endured a substantial drawdown. Currently hovering around 90%, the indicator implies that approximately 10% of the supply is experiencing losses. Notably, the last time the metric touched these levels was on March 22, which coincided with the asset's previous price bottom.

Implications for Market Dynamics

Elevated levels of Bitcoin supply in profit generally coincide with market tops. This is because investors who are profiting from their holdings are more likely to sell, potentially triggering a sell-off. Conversely, when investor profitability drops, the likelihood of a market bottom increases.

While the current value of 90% is still relatively high, it is not uncommon during bull markets. Strong demand and the pursuit of all-time highs typically result in a high concentration of supply in profit.

Cooling Profitability and Price Continuation

The recent cooling off of Bitcoin profitability compared to earlier levels may bode well for the continuation of the bull run, mirroring the market behavior observed last month.

Current Price and Market Sentiment

At the time of writing, Bitcoin is trading around $65,700, marking a decrease of over 5% in the past week. Despite the recent price fluctuations, the market sentiment remains positive, with analysts anticipating a potential upward trajectory in the near future.

Conclusion

The decline in Bitcoin's supply in profit signals a potentially important market development. Historically, low profitability levels have coincided with market bottoms, suggesting that the recent price crash may have created an opportunity for investors to enter the market. As market demand remains strong and the pursuit of new all-time highs continues, the cooling off of investor profitability may contribute to the continuation of the current bull run.