On-chain data shows that the Bitcoin “Supply Stress Ratio” has climbed to 0.23 recently, a sign that may not be positive for the BTC market.
Bitcoin Supply Stress Ratio Indicates Market Currently Under Stress
In a new post on X, the on-chain analytics firm Glassnode has discussed about the the latest trend in the Bitcoin Supply Stress Ratio. The “Supply Stress Ratio” here refers to an indicator that measures, in the analytics firm’s words, “the relative magnitude of supply in loss.”
The BTC Blockchain data is public, meaning anyone can look at the transaction history that the users have participated in. This allows for a way to track things like investor cost basis and profit-loss status.
The cost basis of the holders, also known as the Realized Price, can be obtained by assuming that the previous transaction of any token of the cryptocurrency represents the last time that it changed hands. That is, the price at its time was its acquisition value.
Comparison of this cost basis against the current spot price can tell us whether the coin is currently being held at a profit or loss. The Supply Stress Ratio makes use precisely of this data to calculate its value.
When the indicator’s value is zero, it means no part of the BTC supply is being held at a loss. In other words, the market isn’t under any ‘stress’. This condition occurs only when the asset’s price is exploring new all-time highs (ATHs).
The rest of the time, the metric stays above this mark, indicating some portion of the investors are underwater. The higher the indicator’s value, the more the supply is in loss, and so, the higher the market stress.
Now, here is the chart shared by Glassnode, that shows the trend in the Bitcoin Supply Stress Ratio over the past year:
Looks like the metric has been elevated in recent weeks | Source: Glassnode on X
As is visible in the above graph, the Bitcoin Supply Stress Ratio has witnessed a jump recently as the asset’s bearish price action has occurred. The indicator is now sitting at a value of 0.23, which is the highest since September. “Historically, values above 0.2 have marked periods of heightened market stress,” notes the analytics firm.
In the chart, the data of two other metrics is also displayed. Colored in red is the Realized Price of the Supply in Loss, meaning that it’s the average value at which the loss holders purchased their coins. Similarly, the blue line represents the Realized Price of the Supply in Profit.
The stress that the loss investors are under right now is also visible from these metrics, as the spot price of the asset is currently trading notably under the red curve.
So far, Bitcoin has shown stabilization around its lows, but it only remains to be seen whether the decline is over or if there is more to come. Naturally, a further drawdown would mean an increase in the Supply Stress Ratio. “If the value continues to rise, it could signal increasing market pressure, potentially reinforcing a broader shift in sentiment,” explains Glassnode.
BTC Price
Bitcoin has taken to sideways movement recently as its price is still floating around the $83,000 mark, printing flat returns for the week.
The trend in the BTC price over the last 30 days | Source: BTCUSDT on TradingView
