On-chain data shows that bitcoin price may be overheated right now, but some altcoins are currently within the opportunity zone.
Some Altcoins have low supply and profit levels, unlike bitcoin
According to data from the on-chain analysis firm Holy, the btc profitability index has reached levels that investors should be cautious about. The relevant metric here is the “percentage of total supply in profits”, which, as the name suggests, tells us about the proportion of the supply of an asset that generates some unrealized profit.
The indicator works by reviewing the on-chain history of each circulating coin to see what price it last moved at. If this previous transfer price for any coin was less than the current spot price of the cryptocurrency, then that particular coin is assumed to be making profits at the moment.
The metric adds up all those coins and calculates what percentage of the total circulating supply they represent. Bid at profit also has a counterpart indicator called bid at loss, which tracks the opposite type of tokens.
Now, here is a chart showing the trend in the percentage of total supply in profits for bitcoin, as well as some of the major altcoins, over the past year:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/12/Bitcoin-Overheated-But-These-Altcoins-Could-Be-Worthy-Buys.jpeg" alt="bitcoin and Altcoins Supply with Profits” width=”2710″ height=”1811″/>
Looks like the the value of the metric has been quite high for btc in recent days | Source: Santiment on X
As shown in the chart above, bitcoin has naturally seen its profit supply skyrocket recently as the cryptocurrency's rise has occurred. The indicator value for the asset currently stands at around 89%, which is close to the highest point of the year.
Generally, investors who make profits are more likely to sell their coins as they might be tempted to reap their profits. Therefore, the more holders have profits, the more likely it is that the cryptocurrency will witness a large-scale sell-off.
For this reason, tops have historically been more likely to form following spikes in the bid-to-earnings percentage. As bitcoin is quite overheated in terms of this metric right now, the coin may have trouble continuing its recent uptrend.
Many major altcoins are also seeing relatively high levels of this metric as the majority of their supplies enjoy gains. However, Polygon (MATIC) and Litecoin (LTC) stand out as the two assets that still register low levels of profitability.
You can see from the chart that less than 42% of the supply of these altcoins is generating profits. Based on this, Santiment suggests that there could be a higher probability of these assets registering some new uptrend from here, catching up with the rest of the crowd.
MATIC price
Polygon has seen a rise of more than 7% over the last 24 hours, a possible indication that low profitability is already affecting the asset.
The price of the altcoin appears to have shot up during the past day or so | Source: MATICUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, Santiment.net
