On-chain data shows that bitcoin's profitability ratio is at 202% right now. Here's how this compares to the asset's previous bull runs.
bitcoin Average Profitability Index Has Increased Recently
in a new x.com/AxelAdlerJr/status/1848725483417903193″ target=”_blank”>mail In x, CryptoQuant author Axel Adler Jr. analyzed the latest trend in bitcoin's average profitability index. The “Average Return Index” is an on-chain indicator that tells us how the asset's spot price compares to its realized price.
The “realized price” here is a measure of the average investor's cost basis or address on the bitcoin network. The Average Profitability Index is calculated as a percentage, with the 100% mark corresponding to the spot price equal to the realized price.
When the value of this indicator is greater than 100%, it means that the asset is currently trading above the average investor's cost base, so one could assume that the overall market is in a state of profit. On the other hand, being below this limit suggests that holders as a whole are carrying their coins at a net unrealized loss.
Now, here is a chart showing the trend in bitcoin's average profitability index over the last decade:
<img src="https://technicalterrence.com/wp-content/uploads/2024/10/Bitcoin-profitability-index-reaches-202-is-this-enough-to-reach.jpeg" alt="bitcoin Average Profitability Index” />
As shown in the chart above, bitcoin's average profitability index has been above 100% since last year, suggesting that investors as a whole have been enjoying gains.
The value of the indicator had shot up to particularly high values earlier this year, when the rally towards the new all-time high (ATH) occurred. With the latest rally the coin has experienced, the indicator has recovered once again, although it is still a notable distance from the level seen during the ATH.
Currently, the average profitability ratio of btc floats around 202%, which implies that the spot price is double the realized price. Historically, the indicator reaching extreme levels has typically led to highs for the asset.
This is because investors' temptation to engage in profit-taking increases the higher their profits. “When the index exceeds 300%, investors are likely to start actively taking profits,” the analyst notes.
The chart shows that the last two times bitcoin's average profitability index surpassed this 300% mark were during the peaks of the 2017 and 2021 bull runs.
Therefore, based on this historical pattern, bitcoin's current bullish period may not end until the indicator enters the zone above 300%.
btc Price
At the time of writing, bitcoin is trading at around $67,400, up 1% over the last seven days.
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