Bitcoin’s Latest Run Drives Up Supply in Profit
After Bitcoin’s recent rally, the supply of Bitcoin in profit has reached significant levels. This metric measures the percentage of the total circulating Bitcoin supply that currently holds unrealized gains. When analyzing the transaction history of each coin on the blockchain, it compares the last price at which the coin changed hands to the current spot value. If the previous transfer price is lower than the current price, then the coin is considered to be holding a profit. The supply in profit calculates the percentage of all coins that fall into this category.
The Relationship Between Supply in Profit and Market Tops
Historically, when the supply in profit reaches high levels, it has signaled potential market tops. For instance:
- In April 2019, the supply in profit peaked just as Bitcoin’s price reached its highest point.
- During the start of the last bull market in 2020, there was a local top coinciding with these high levels.
This pattern suggests that when a large percentage of investors are in profit, there is a higher likelihood of mass selling. However, it’s worth noting that during previous bull runs, such as those in 2017 and 2021, and during the November 2021 peak, the indicator exceeded these levels before a top was encountered.
Therefore, it remains uncertain whether the current rally will follow a similar pattern to April 2019, indicating a potential top, or if it signifies a proper bull run with more room for growth.
Bitcoin Price Analysis
Currently, Bitcoin is trading around $56,500, showing an 8% increase over the past week.
[Insert Bitcoin Price Chart]Hot Take: What Does This Mean for Bitcoin?
The surge in Bitcoin’s supply in profit suggests that the market may be approaching a critical point. Here’s what you need to consider:
- Profitable investors are more likely to sell their coins, which can lead to a mass selloff.
- Previous market tops have coincided with high levels of supply in profit, indicating a potential trend.
- However, there have been instances where the indicator surpassed these levels before a top was reached, suggesting further growth.
Ultimately, it’s essential to monitor the market closely and analyze other indicators to determine whether this rally will result in a market top or if there is still room for Bitcoin to continue its upward trajectory.
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