Bitcoin Breaks $64,000, But This Pattern Could Mean Bull Run Isn’t Safe
August 26 2024 - 10:30PM
NEWSBTC
On-chain data shows the Bitcoin Supply in Profit indicator has been
forming a pattern recently that could put the bull run into
jeopardy. Bitcoin Supply In Profit Has Seen Multiple Dips Into
“Transition” Zone Recently As an analyst in a CryptoQuant Quicktake
post explained, the recent “Supply in Profit” trend could
suggest a potential entry into the transition zone for Bitcoin.
Related Reading: Bitcoin Investors Are Still Fearful: What Needs To
Happen For A Turnaround? The Supply in Profit here refers to an
on-chain metric that, as its name suggests, keeps track of the
percentage of the total circulating BTC supply that’s currently
holding some net unrealized profit. The indicator works by going
through the transfer history of each coin on the network to check
the price at which it was last moved. As the previous transaction
of any coin is likely to represent the last time it changed hands,
the price at its time could be considered its cost basis. If this
previous transfer price for any coin is lower than the current spot
price of the cryptocurrency, then that particular coin is holding a
net gain right now. The Supply in Profit adds up all coins that
satisfy this condition and calculates what part of the supply they
make up for. There also naturally exists an indicator called the
Supply in Loss, which works similarly to the Supply in Profit,
except that it keeps track of the tokens of the opposite type. Now,
here is a chart that shows the trend in the Bitcoin Supply in
Profit over the last few years: As displayed in the above graph,
the Bitcoin Supply In Profit is currently at 85%, meaning 85% of
all tokens in circulation are holding profits. This is a notable
value and has historically corresponded to the bull market phase of
the cycle. That said, the metric has only reached the current value
after the latest price recovery to the $64,000 level, as it had
slipped under the 80% mark earlier, which had put it inside the
transition zone between bull and bear phases. While it’s certainly
not a negative development that BTC has recovered back into the
bull market zone, the recent pattern may raise doubts about whether
this recovery can last. The chart shows that the indicator also saw
the same trend of dipping into the transition zone and recovering
in July. That surge didn’t last for too long. The quant has also
pointed out how the Bitcoin Supply in Profit has been in an overall
downward trajectory in the last few months, raising the chances of
the metric going down again shortly. Related Reading: These Are The
Biggest Bitcoin Support & Resistance Zones, Analyst Reveals In
the scenario that the indicator does witness another drawdown into
the transition zone, then it’s possible BTC could end up going
through a period of downturn that may even lead to a new bear
market. It only remains to be seen how the Bitcoin price, and thus,
the Supply in Profit, develop in the coming days. BTC Price Bitcoin
has enjoyed a surge of almost 10% in the last seven days, which has
taken its price to $63,900. Featured image from Dall-E,
CryptoQuant.com, chart from TradingView.com
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