On-chain data shows that Bitcoin's profit supply plunged after the asset's price last fell towards the $65,000 level.
Bitcoin's profit supply is now down to around 90%
As analyst James Van Straten pointed out in a job on X, around 10% of the BTC supply is now in a state of loss. The on-chain indicator of interest here is “Profit Supply Percentage,” which tracks the percentage of the total circulating Bitcoin supply holding unrealized gain.
This metric works by looking through the blockchain history of each coin in circulation to see the price at which it last moved. Assuming this previous transaction involved a change of hands, the price at the time would serve as the cost basis for the coin.
Coins with a cost basis lower than the current spot price of the cryptocurrency would naturally be considered to be making a profit, and as such would be counted toward the profit supply.
The Profit Offer Percentage adds up all of these coins and calculates how much of the total supply they represent. The opposite measure, the losing bid percentage, adds up the coins not satisfying this condition.
Since the total circulating supply must total 100%, the losing supply percentage can be deducted from the profiting supply percentage by subtracting its value from 100.
Now here is a chart that shows the profit bid percentage trend for Bitcoin over the past few months:
Looks like the value of the metric has taken a plunge in recent days | Source: @jvs_btc on X
As seen in the chart above, Bitcoin's profit supply percentage has seen a sharp decline recently as the price of the cryptocurrency has suffered a significant decline.
The value of the indicator has fallen to around 90%, which means that around 10% of the supply is currently in deficit. The chart shows that the last time the metric reached these levels was March 22. Interestingly, the asset also hit its lowest level around this time.
Previously, the profit supply percentage had pushed towards the 100% mark, which was a natural consequence of price setting a new all-time high (ATH), because at new highs, all supply must be off the red.
In general, investors who make a profit are more likely to sell their coins, so if many make gains, the possibility of a selloff increases. For this reason, high levels of profit offer percentage have often led to highs.
Likewise, dips become more likely when investors' profitability levels fall relatively low. The current value of 90% is still quite high, but this is not unusual during bullish times as demand is strong and ATHs are under consideration.
The fact that profitability has slowed from previous levels could be positive for the chances of the rally continuing, just as it did last month.
BTC Price
At the time of writing, Bitcoin was trading around $65,700, down more than 5% over the past week.
The price of the asset seems to have been tumbling down over the past couple of days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Glassnode.com, chart from TradingView.com
Disclaimer: The article is provided for educational purposes only. It does not represent the views of NewsBTC on whether to buy, sell or hold investments and, naturally, investing involves risks. You are advised to carry out your own research before making any investment decision. Use the information provided on this website entirely at your own risk.