On-chain data shows Bitcoin is currently not satisfying a condition that has historically occurred alongside major bottoms in the price.
In a new post on X, James V. Straten, a research and data analyst, has pointed out how BTC isn’t fulfilling the bottom condition for the supply in profit and loss metrics.
- The “supply in profit” refers to the total amount of Bitcoin supply currently carrying an unrealized profit.
- The “supply in loss” keeps track of the number of underwater coins.
- The supply in profit decreases during historical bottoms, indicating most of the market enters into a state of loss.
- When the supply in profit is high, tops become more probable as investors in profit are more likely to sell.
- The current market is nowhere near fulfilling the historical bottom criteria, as there is a difference of six million coins between the supply in profit and the supply in loss.
Why the supply in profit and loss pattern may not indicate the current market bottom:
The bottoms that the pattern has coincided with have been cyclical lows observed during the worst phase of bear markets.
- The only exception to this rule was in March 2020 when Bitcoin crashed due to the onset of the COVID-19 virus.
- The current market stage may already be past the bear-market bottom, so the supply in profit and loss pattern may not hold much bearing on whether BTC has hit a local bottom after the recent crash.
Hot Take:
If the November 2022 low wasn’t the true bear-market bottom, BTC might have more pain in store before the real bottom is found. As of now, Bitcoin is trading around $26,300, down 7% in the last seven days.
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