Why Bitcoin Drawdown May Still Not Be Painful Enough For Bottom

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The Bit­coin sup­ply in prof­it met­ric could hint that the cur­rent bear mar­ket hasn’t been painful enough yet for the cycli­cal bot­tom to be formed.

Bitcoin Supply In Profit Has Plummeted To 45% Following Crash

As point­ed out by an ana­lyst in a Cryp­to­Quant post, all the his­tor­i­cal bot­toms took place when the prof­it in sup­ply dipped below 40%.

The “sup­ply in prof­it” is an indi­ca­tor that mea­sures the per­cent­age of the total Bit­coin cir­cu­lat­ing sup­ply that’s cur­rent­ly in some profit.

This met­ric works by going through the on-chain his­to­ry of each coin to see what price it was last moved at. If this pre­vi­ous price for any coin was less than the val­ue of BTC right now, then that par­tic­u­lar coin is car­ry­ing some prof­it at the moment.

The indi­ca­tor takes the total of such coins and then gives the per­cent­age based on the total num­ber of coins in cir­cu­lat­ing sup­ply. The oppo­site met­ric is the “sup­ply in loss” and it’s sim­ply cal­cu­lat­ed by sub­tract­ing the sup­ply in prof­it from 100.

Relat­ed Read­ing: Despite Huo­bi Token’s 24% Decline In Past Week, Whales And Sharks Con­tin­ue To Buy

Now, here is a chart that shows the trend in the Bit­coin sup­ply in prof­it over the last sev­er­al years:

Bitcoin Supply In Profit

The value of the metric seems to have sharply dropped in recent days | Source: CryptoQuant

As you can see in the above graph, the per­cent­age of the Bit­coin sup­ply in prof­it has plunged recent­ly due to the crash kicked off by the col­lapse of the FTX cryp­to exchange.

Fol­low­ing this plum­met, the indi­ca­tor now has a val­ue of just 45%. This means that more than half of the total sup­ply has now entered into a state of loss.

The chart also high­lights the val­ues of the met­ric that were observed dur­ing the bot­toms of the pre­vi­ous two halv­ing cycles.

It looks like less than 40% of the Bit­coin sup­ply was car­ry­ing some unre­al­ized prof­it in both of those bear mar­ket lows.

If the same pat­tern forms this time as well, then it would mean the sup­ply in prof­it still has to drop by more than 5 units in order to hit the his­tor­i­cal bot­tom values.

Such a shift in prof­itabil­i­ty can only take place after more decline in the price, which implies pain isn’t quite over for Bit­coin investors just yet.

BTC Price

At the time of writ­ing, Bitcoin’s price floats around $16.6k, down 6% in the last week. Over the past month, the cryp­to has accu­mu­lat­ed 14% in losses.

Bitcoin Price Chart

Looks like the price of the coin is still continuing its sideways movement | Source: BTCUSD on TradingView
Featured image from Hans-Jurgen Mager on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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