Bitcoin has extended its recent decline and has now plunged under $39,000. Here are the levels where a bottom could form, according to a quant.
Bitcoin Supply In Loss Is Nearing In On Historical Rebound Level
As an analyst in a CryptoQuant Quicktake post explained, the BTC price and Supply in Loss have followed a certain pattern a few times. The “Supply in Loss” here is an indicator measuring the percentage of the Bitcoin supply currently being held at some loss.
This metric works by going through the on-chain history of each coin in circulation to see what price it was last moved at. If this last transfer price for any coin was less than the current spot price of the asset, then that particular coin is sitting on some unrealized loss right now.
This is only with the assumption, of course, that the last transaction of the coin indeed involved a change of hands (that is, its cost basis was reset to the price at the time).
The Supply in Loss adds up all such coins satisfying this condition and calculates what percentage of the total circulating supply of the cryptocurrency they make up for.
Now, here is a chart that shows the trend in the Bitcoin Supply in Loss over the last few years:
Looks like the value of the metric has been shooting up in recent days | Source: CryptoQuant
As displayed in the above graph, the Bitcoin Supply in Loss had fallen to relatively low levels earlier when the asset price had observed its rally. Still, following the latest plunge in the cryptocurrency’s price, the indicator has naturally spiked up.
At present, around 20.87% of the supply is carrying some amount of unrealized loss. In the chart, the quant highlighted a pattern BTC followed when encountering a similar trend in the Supply in Loss.
It would appear that the Supply in Loss had found rebounds around the 23.35% mark for the cryptocurrency before, which resulted in the asset setting off on a rally and the metric declining back to low levels.
Investors in profit are more likely to sell their coins at any point, so the increase in Supply In Loss suggests that potential profit-takers have lessened the amount for Bitcoin.
For this reason, cyclical bottoms have generally coincided with very high metric levels. This fact may also explain why this curious pattern pointed out by the quant has formed in the middle of cycles.
The metric is currently near this level that has proven to be significant historically. Assuming that a similar pattern will also follow for the asset this time, the cryptocurrency may find its reversal once this level is hit.
Supply in Loss goes up when the price goes down. Hence, for the metric to attain this 23.35% level, Bitcoin would have to revisit lower price levels. According to the analyst, this would happen between price targets of $36,000-$37,000.
BTC Price
At the time of writing, Bitcoin is trading at around $38,700, down almost 10% in the past week.
The price of the coin has been on the decline recently | Source: BTCUSD on TradingView