On-chain data shows percentage of the Bitcoin supply in profit has dropped to lows not seen since July, suggesting that the bottom might be in.
Bitcoin Percentage Of Supply In Profit Dips To July 2021 Lows
As pointed out by an analyst in a CryptoQuant post, the percentage of the Bitcoin supply that’s currently in profit has declined to the same lows as in July of last year.
The “percentage supply in profit” is an indicator that measures what percentage of the total BTC supply is currently in profit.
The metric works by comparing the value each coin was last moved at to the current Bitcoin price. Based on this, it becomes possible to know which coins are in profit.
As the price of BTC rises, a higher amount of coins would start getting into profit, and the value of the indicator would rise.
When the metric attains too high values, however, a correction in the price could occur as holders would become more probable to harvest their profits.
On the other hand, as the price declines, coins start treading into the red, and the value of the metric drops in response.
When too many coins get into losses, that is, when the indicator’s value declines sharply, a bottom may instead form.
Now, here is a chart that shows the trend in the Bitcoin percent of supply in profit over the past six months:
Looks like the indicator's value has dipped recently | Source: CryptoQuant
As you can see in the above graph, the metric’s value has declined in the past couple of months. At the moment, around 66% of the supply looks to be in profit.
Related Reading | Bitcoin Plummeted by 10% in 8 Hours! How do We Survive the Cold Winter?
This happens to be about the same level as when the price of BTC bottomed out at $29k back in July of the previous year.
This could suggest that $40k may have been the bottom of the current Bitcoin trend. However, some other indicators may tell a different story, leaning more towards a bearish outcome for the price of the crypto. For instance, the STH-MVRV bear market signal went off a couple of weeks back.
At the time of writing, Bitcoin’s price floats around $41.8k, down 11% in the last seven days. Over the past month, the crypto has lost 12% in value.
The below chart shows the trend in the price of BTC over the last five days.
BTC's price seems to have held above $40k as it has moved sideways in the last few days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com