On-chain data shows the Bitcoin price may be overheated right now, but some altcoins are currently sitting inside the opportunity zone.
Some Altcoins Have Low Levels Of Supply In Profit, Unlike Bitcoin
According to data from the on-chain analytics firm Santiment, BTC’s profitability ratio has hit levels that investors might need to be cautious about. The relevant metric here is the “percent of total supply in profit,” which, as its name suggests, tells us about the share of an asset’s supply that’s carrying some unrealized profit.
The indicator works by going through the on-chain history of each coin in circulation to see what price it was last moved at. If this previous transfer price for any coin was less than the current spot price of the cryptocurrency, then that particular coin is assumed to be carrying a profit right now.
The metric adds up all such coins and calculates what percentage of the total circulating supply they make up for. The supply in profit also has a counterpart indicator called the supply in loss, which keeps track of the opposite type of tokens.
Now, here is a chart that shows the trend in the percent of total supply in profit for Bitcoin, as well as for some of the top altcoins, over the past year:
Looks like the the value of the metric has been quite high for BTC in recent days | Source: Santiment on X
As displayed in the above graph, Bitcoin has naturally seen its supply in profit shoot up recently as the surge in the cryptocurrency has occurred. The indicator’s value for the asset is currently sitting around the 89% mark, which is close to the highest point for the year.
Generally, the investors sitting on profits are more likely to sell their coins as they could become tempted to harvest their gains. Therefore, the more holders there are in profit, the more likely is the cryptocurrency to witness a large-scale selloff.
Due to this reason, tops have historically been more probable to form after spikes in the percent supply in profit. As Bitcoin is quite overheated in terms of this metric at the moment, it’s possible that the coin would have trouble continuing its recent uptrend.
Many of the top altcoins are also observing relatively high levels of this metric, as the majority of their supplies are enjoying profits. Polygon (MATIC) and Litecoin (LTC), though, stand out as the two assets that are still seeing low levels of the profitability ratio.
From the chart, it’s visible that less than 42% of the supply of these altcoins is in profit. Based on this, Santiment suggests that there could be a higher likelihood for these assets to register some fresh uptrend from here, catching up to the rest of the crowd.
MATIC Price
Polygon has registered a rise of over 7% during the past 24 hours, a possible indication that the low profitability is already having an effect on the asset.
The price of the altcoin appears to have shot up during the past day or so | Source: MATICUSD on TradingView