On-chain data shows that the supply of Bitcoin as a profit is plummeting following the recent crash in the price of Bitcoin towards the $65,000 level.
Profitable Bitcoin supply now down to around 90%
As analyst James Van Straten pointed out in a paper, post At X, approximately 10% of the BTC supply is currently in a loss state. The on-chain metric to focus on here is “supply as a percentage of profit.” This tracks the percentage of the total Bitcoin supply in circulation that holds unrealized profits.
This indicator works by looking at the blockchain history of each coin in circulation to see the last price transferred. Assuming this previous transaction involved a change in ownership, the price at that time will serve as the cost basis for the coin.
Coins with a cost basis lower than the current spot price of the cryptocurrency are naturally considered to hold profits and are counted in the supply of profits.
Profit Supply Percentage adds up all such coins and calculates what portion of the total supply they represent. The opposite metric, loss supply rate, sums up the coins that do not meet this condition.
Since the total circulating supply must add up to 100%, the percentage supply of losses can be estimated from the percentage supply of profits by subtracting that value from 100.
Here is a graph showing the trend of Bitcoin's percentage return on supply over the past few months.
Looks like the value of the metric has taken a plunge in recent days | Source: @jvs_btc on X
As shown in the graph above, Bitcoin's profit supply rate has fallen sharply recently as crypto prices have fallen significantly.
The value of the indicator has dropped to about the 90% mark. This means that about 10% of the supply is currently at a loss. The graph shows that the last time the indicator reached these levels was on March 22nd. Interestingly, this asset also bottomed out around that time.
Previously, the supply to earnings ratio was being pushed towards the 100% mark, which was a natural consequence of prices hitting new all-time highs (ATH). Because at a new high, all supply should be out of the red.
Investors who are making profits are generally more likely to sell their coins, so if a lot of investors make profits, the likelihood of a large sale increases. For this reason, high levels of profit supply often led to ceilings.
Similarly, if an investor's profitability level declines to a relatively low level, a bottom is likely to occur. The current value of 90% is still quite high, but this is not unusual in a bull market as there is strong demand and ATHs are being explored.
The fact that profitability has cooled compared to previous levels may be a positive for the rally's chances of continuing, as it was last month.
BTC price
At the time of this writing, Bitcoin is trading at levels around $65,700, down more than 5% over the past week.
The price of the asset seems to have been tumbling down over the past couple of days | Source: BTCUSD on TradingView
Featured images from Shutterstock.com, Glassnode.com, charts from TradingView.com
