Here’s what on-chain data says regarding whether bitcoin‘s latest rally has reached the overheated “euphoria” stage where past bull runs peaked.
bitcoin Supply Percentage in Profits Has Now Hit the 83% Mark
In its latest weekly report, the on-chain analysis firm glass node has discussed btc‘s “euphoric” phase from the angle of investor profitability. Euphoria basically refers to that market period when investors have started embracing greed and the rally is heating up.
Historically, the asset’s major rallies have reached their highs in such market conditions. To define what constitutes euphoria, Glassnode has referred to the “bid percentage to profit” metric. This indicator tracks the percentage of the total bitcoin supply in circulation that is currently held in profit.
Below is a graph showing the trend of this indicator over the last decade:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/Has-Bitcoin-already-reached-euphoria-What-on-chain-data-says.png" alt="bitcoin Supply in Profits” width=”2000″ height=”1152″ loading=”lazy” data-recalc-dims=”1″/>
The value of the metric seems to have observed a large spike in recent days | Source: Glassnode's The Week Onchain - Week 47, 2023
As shown in the chart above, bitcoin‘s bid-to-earnings percentage has naturally skyrocketed as the cryptocurrency’s latest rally occurred and the metric’s value is now floating around the 83% mark.
The historical average for the metric is 74%, so current levels are notably above this level. On the chart, the analysis firm also marked the +1 standard deviation line for the indicator, above which it can be thought that the market has entered the early stages of the euphoria phase.
The +1 standard deviation line for the metric is around 90%, so current profitability levels are still below the mark, but they are rapidly closing the gap anyway.
As mentioned above, these profitability levels are in terms of supply or coins, and are calculated by checking the number of tokens that have their cost basis below the current spot price.
However, there is another way to measure profitability, and that is the magnitude of profits these combined coins are making right now. This unrealized profit is naturally calculated by subtracting the cost basis of each currency from the current spot price and adding these differences for the entire supply into profits.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/1700658466_675_Has-Bitcoin-already-reached-euphoria-What-on-chain-data-says.png" alt="bitcoin Unrealized Profit” width=”2000″ height=”1152″ data-recalc-dims=”1″/>
The data for the unrealized profit over the past decade | Source: Glassnode's The Week Onchain - Week 47, 2023
“For the analysis of investor behavior, unrealized profit is often a more critical variable, as it relates to the dollar-denominated profit of investors’ positions,” explains Glassnode.
From the chart you can see that the +1 standard deviation line for this bitcoin indicator is still quite far from the current value, which means that the coin is far from reaching the state of bull market euphoria.
“This suggests that while a significant volume of supply is profitable, the majority has a cost base that is only moderately below the current spot price,” the report notes.
btc Price
bitcoin has seen some volatility over the past day following the news that Changpeng Zhao (CZ) has resigned as CEO of Binance. Previously, the asset had fallen below the $36,000 level but has since recovered to $36,600.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/oBwpj6Vs/" alt="bitcoin price chart” width=”1534″ height=”869″/>
Looks like btc has been mostly trading sideways recently | Source: BTCUSD on TradingView
Featured image by Yiğit Ali Atasoy on Unsplash.com, TradingView.com charts, Glassnode.com
