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27/08/24
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Bitcoin Supply in Profit Indicator Signals Potential Market Shift
Recent on-chain analysis indicates that the Bitcoin Supply in Profit metric is displaying a concerning pattern that may threaten the current bullish market dynamics. This metric tracks the percentage of Bitcoin currently held at a profit, reflecting the potential for market shifts.
The Supply in Profit metric compiles data on the last transfer price of each Bitcoin, determining if the current market price exceeds this cost basis. If a Bitcoin’s previous transaction price was lower than present market values, that Bitcoin is considered to be generating unrealized profit. This metric now reports that 85% of circulating Bitcoin is in profit, a figure that aligns closely with historically bullish market phases.
However, this figure has only recently climbed back above the critical 80% threshold after Bitcoin’s price recovered to approximately $64,000. Prior to this recovery, the metric had dipped into the transition zone, an area that typically signals a market in flux between bullish and bearish trends. Patterns observed in July, where the Supply in Profit also dipped significantly before a brief uptick, raise concerns about the sustainability of the current recovery.
Additionally, the trend of this indicator has been downward in the preceding months, suggesting the possibility of future declines. Should the Supply in Profit fall back into the transition zone again, it could indicate a looming downturn for Bitcoin, possibly leading to a new bear market phase.
Currently, Bitcoin’s price has experienced an increase of nearly 10% over the past week, reaching $63,900. The focus now shifts to how the market will evolve in the coming days, particularly regarding the trajectory of the Bitcoin Supply in Profit and overall price developments.
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