On-chain data suggests Bitcoin may be overheated, but some altcoins present an opportunity
Data from on-chain analytics firm Santiment reveals that Bitcoin’s profitability ratio has reached a level that investors should approach with caution. This ratio, known as the “percent of total supply in profit,” indicates the share of an asset’s supply that is currently carrying unrealized profit.
The metric analyzes the on-chain history of each coin to determine if its previous transfer price was lower than the current spot price. If so, the coin is considered to be carrying a profit. The percentage of coins in profit is then calculated based on the total circulating supply.
A chart shows the trend in the percent of total supply in profit for Bitcoin and top altcoins over the past year. Bitcoin’s percentage is currently around 89%, close to its highest point for the year.
Typically, when a large number of holders are in profit, there is a higher likelihood of a significant sell-off as investors may be tempted to take their gains. Therefore, Bitcoin’s high percentage in profit could potentially impede its recent upward trend.
However, some altcoins, such as Polygon (MATIC) and Litecoin (LTC), have lower levels of profitability compared to others. Less than 42% of these altcoins’ supplies are currently in profit, suggesting a potential opportunity for an uptrend.
MATIC Price
Polygon has seen a rise of over 7% in the past 24 hours, indicating that its low profitability may already be influencing its price.
Hot Take: Altcoins Present an Opportunity Amidst Bitcoin Overheating
While Bitcoin’s profitability ratio suggests a potential slowdown in its upward momentum, some altcoins, particularly Polygon and Litecoin, present an opportunity for investors. These altcoins have lower levels of supply in profit compared to Bitcoin and other top altcoins, indicating the potential for a fresh uptrend. Historically, tops in the market have been more likely to form after spikes in the percentage of supply in profit. Therefore, it may be worth considering diversifying your cryptocurrency portfolio with these altcoins that still have room to grow. However, always conduct thorough research and analysis before making any investment decisions.
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