On-chain data shows that Bitcoin supply profits have reached nearly 95% during the recent rally, which may indicate that the asset has peaked.
Bitcoin supply profits surge to high levels recently
As analyst James Van Straten explains in a new report postal At X, Bitcoin’s profit supply percentage is approaching the area that has historically caused the currency to peak.
“Profit Supply %” here refers to an on-chain metric that tracks the total percentage of Bitcoin supply with some unrealized gains.
This indicator works by looking at the blockchain history of each coin in circulation to see the price at which it last traded. Assuming the coin’s last transaction involved changing hands, the previous price will be its current cost basis.
Therefore, if the last transfer price of any coin is lower than the spot price of the cryptocurrency, then that particular coin will currently be profitable. Supply % in Profit adds up all such coins and calculates their percentage of supply.
The corresponding metric “Supply Loss %” tracks the opposite type of coin. Since the supply must add up to 100%, the loss supply percentage is naturally 100 minus the profit supply percentage.
Now, the chart below shows the trend of Bitcoin supply as a percentage of profits over the past few years:
The value of the metric seems to have been sharply going up in recent days | Source: @jvs_btc on X
As shown in the chart above, Bitcoin profit supply percentage has naturally surged recently as BTC observed the latest bullish push. Earlier in this rally, Bitcoin was close to $49,000, but the coin has fallen back to current price levels.
In the chart, the analyst marked two indicator areas that have historically been associated with cryptocurrencies. In the red zone, when the value is greater than 95%, the asset has usually peaked.
This pattern occurs because profitable investors are more likely to sell their tokens. As many holders take profits, the likelihood of a massive sell-off increases.
Therefore, it is not surprising that the coin may form a top when the extreme part of the supply is in the green. The opposite is true for the sub-50% area, where the cryptocurrency has bottomed.
At these levels, most of the supply is at a loss, so there aren’t many profitable sellers left in the market. The exhaustion of selling pressure helps the coin reach a turning point.
The chart shows that the latest profit supply percentage level is not far from the 95% cutoff of the top area. Given these high levels, the coin is probably on the verge of at least hitting a local top, if not already there.
Since its earlier surge, Bitcoin has fallen back to $47,900 levels.
Looks like the price of the coin has observed a sharp surge recently | Source: BTCUSD on TradingView
Featured images from iStock.com, charts from TradingView.com, Glassnode.com