On-chain data shows that bitcoin investors are now seeing average profits of 121%. Here's whether this has been enough for a top in the past.
bitcoin profitability index currently stands at around 221%
in a new x.com/AxelAdlerJr/status/1854795174192284140″ target=”_blank”>mail On x, CryptoQuant author Axel Adler Jr talked about the latest trend in bitcoin's average profitability index. The “Average Return Index” is a btc indicator that compares the spot value of the asset to its realized price.
The “realized price” here refers to a measure of the average investor's cost base or acquisition value in the bitcoin market. The value of this metric is determined using on-chain data, taking as the current cost basis the last transaction price for each currency in circulation on the blockchain.
When the average profitability ratio is greater than 100%, it means that the spot price of the cryptocurrency is currently higher than its realized price. This trend suggests that the average investor has a net amount of profit.
On the other hand, the fact that the indicator is below this threshold implies that the btc market as a whole is carrying coins at a net unrealized loss. Naturally, the fact that the ratio is exactly equal to 100% indicates that holders as a whole are just barely breaking even on their investment.
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/2024/11/Bitcoin-Holders39-Profits-Now-121-How-Much-Higher-Can-BTC.jpeg" alt="bitcoin Average Profitability Index” />
As can be seen in the chart above, bitcoin's average profitability index has seen a notable increase recently as the cryptocurrency's run towards the new all-time high (ATH) price occurred.
The indicator has now reached a value of around 221%, suggesting that investors are making a significant amount of profits. More particularly, btc addresses as a whole make a net profit of 121%.
In general, the higher the holders' profits, the more likely they are to fall for the lure of profit-taking. The current level of the Average Profitability Index is high, but it is unclear if it is high enough for a sell-off to become a risk.
On the chart, the analyst has marked how high the metric went at the time of the previous bull run highs. It would appear that a high of 460% was reached in 2017, while 395% was reached in 2021.
So far in the current cycle, the high reached by the index was 272%, which occurred during the peak in March of this year. Given the fact that the indicator has yet to reach this level, let alone the peaks of the last few cycles, bitcoin may still have enough room to run, before a top is likely.
btc Price
At the time of writing, bitcoin is trading around $76,200, up more than 9% over the past week.
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