On-chain data shows that bitcoin supply with profits has approached the 95% mark during the latest rally, which could indicate a high for the asset.
bitcoin supply in profits has risen to high levels recently
As analyst James Van Straten explains in a new mail At X, bitcoin's profit bid percentage has been approaching territory that has historically led to highs for the currency.
“Supply Profit Percentage” here refers to an on-chain indicator that tracks the total percentage of the bitcoin supply generating any unrealized profit.
The metric works by reviewing the blockchain history of each coin in circulation to see what price the last transaction was made at. Assuming this latest currency transaction involved a change of hands, this previous price would be your current cost basis.
Therefore, if this latest transfer price for any currency was less than the spot price of the cryptocurrency, then that particular currency would be currently generating profits. The bid-to-profit percentage adds up all those coins and calculates what percentage of the bid they represent.
A counter indicator, “Bid Percent Loss,” tracks currencies of the opposite type. Since the bid must add up to 100%, the losing bid percentage is naturally just one hundred minus the winning bid percentage.
Now, here is a chart showing the trend in bitcoin supply percentage in profits over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-supply-with-profits-nears-95-main-sign.jpeg" alt="bitcoin Supply in Profits” width=”1800″ height=”1013″/>
The value of the metric seems to have been sharply going up in recent days | Source: @jvs_btc on X
As the chart above shows, bitcoin's bid-to-profit ratio has naturally skyrocketed recently as btc has seen its latest bullish momentum. At the beginning of this rally, btc had approached $49,000, but the coin has retreated towards current price levels.
On the chart, the analyst has marked the two regions of the indicator that have historically been relevant to the cryptocurrency. In the red zone, at values above 95%, the asset has generally found maximums.
This pattern is because profitable investors are more likely to sell their coins. As many holders take profits, the chances of a sell-off increase.
Therefore, it is not surprising to see that the currency is likely to form spikes when an extreme portion of supply has been in the green. The opposite occurs in the region below 50%, where the cryptocurrency has bottomed out.
At these levels, most of the supply is at a loss, so there are not many profitable sellers left in the market. This exhaustion of selling pressure helps the coin reach an inflection point.
The chart shows that the latest bid-to-earnings percentage levels have not been far from the upper 95% limit. Considering these high levels, the coin may be on the verge of hitting at least a local high if it hasn't already.
btc Price
Since the previous surge, bitcoin has cooled down and pulled back towards the $47,900 level.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-supply-with-profits-nears-95-main-sign" alt="bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the coin has observed a sharp surge recently | Source: BTCUSD on TradingView
Featured image from iStock.com, TradingView.com charts, Glassnode.com
