On-chain data shows that the profitability of bitcoin supply has recently dropped to only 55%. Here’s what the historical trend suggests if a bottom has already been hit or not.
About 45% of the bitcoin supply is underwater at the moment
As indicated by an analyst in a CryptoQuant post, the supply of green during the past cycle was even lower than the current standard.
“Profit supply” is an indicator that measures the percentage of total bitcoin supply that is currently holding a profit.
The metric works by looking at the on-chain history of each coin and checking if the value at which it was last transferred was lower than the current one.
If the last selling price is actually lower, then the currency has accumulated a profit. On the other hand, instead of lowering the current value of BTC, the currency is at a loss at the moment.
Now, here is a chart showing the trend of Bitcoin supply over the last few years:
It seems like the value of the indicator has observed a decline recently | Source: CryptoQuant
As you can see in the graph above, the percentage of bitcoin supply in profit has decreased in the last few months. Currently, the value of the indicator is about 55%.
Following the back of the top in 2017/2018, the metric value has also reached similar values of around 55% after some downward trend.
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Once these values are reached, the supply of profits is temporarily sidelined due to BTC’s value consolidation monitoring.
However, at the end of this subsequent movement, the price saw another big fall, the percentage of profit Bitcoin supply took to the 40s.
It was then that a bottom formation finally occurred. In 2019, a similar (but not exactly the same) pattern was also followed.
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Quant of the Post believes that if a similar trend occurs again, the price of BTC could move past the annoying side of the first few months.
After that, there will be a capitulation phase with a 30% to 50% drop for the price of Bitcoin, before finally reaching a bottom.
At the time of writing, the price of Bitcoin is about $ 28.9k, down 5% on the last seven days. Last month, crypto lost 24% of its value.
The chart below shows the trend of currency prices in the last five days.
Looks like the price of the coin has plunged down over the last couple of days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com