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75% Of Bitcoin Supply Now In Profit, Will A Drop Happen Here?

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On-chain data shows 75% of the entire Bitcoin circulating supply is now in profit, something that could lead to a drop for the asset.

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Bitcoin Supply In Profit Has Registered An Uptick Recently

As pointed out by an analyst in a CryptoQuant post, there may be a risk that the investors would participate in profit-taking here. The “supply in profit” is an indicator that, as its name already implies, measures the total amount of the circulating Bitcoin supply that’s currently holding an unrealized gain.

The metric works by going through the on-chain history of each coin in circulation to see what price it was last moved/transferred at. If this previous price for any coin was less than the current spot price of the asset, then that particular coin is said to be holding a profit right now, and the indicator adds it up to its value.

The “supply in loss” is the counterpart indicator of the supply in profit, and it naturally keeps track of the coins of the opposite type (that is, the coins with a higher acquisition price than the latest spot price).

When the supply in profit goes up in value, it means that more investors are coming into profit. Generally, the more an investor gets in profit, the more likely they become to sell. So, a large amount of the supply carrying some gains can lead to a widespread selloff becoming more probable in the sector.

Now, here is a chart that shows the trend in the 7-day simple moving average (SMA) Bitcoin supply in profit over the history of the cryptocurrency:

Looks like the 7-day SMA value of the metric has been going up in recent days | Source: CryptoQuant

As displayed in the above graph, the 7-day SMA Bitcoin supply in profit has observed a sharp surge recently. This spike in the metric has taken place as the rally in the cryptocurrency’s price towards the $31,000 level has occurred and has put a large number of investors into gains.

At the current values of the indicator, coins equivalent to about 75% of the total circulating supply of the cryptocurrency are carrying some amount of unrealized profit.

Naturally, this would mean that a lot of investors may be thinking about harvesting some of the gains that they have accumulated. If the holders do end up selling here, then the price of the asset could observe a drawdown, at least in the short term.

From the chart, it’s visible that the current level of the indicator is around where the asset hit a local top back in April of this year, and it’s also the same value where the cryptocurrency faced resistance in early 2022.

It now remains to be seen if the market can pull through this psychological barrier and allow the Bitcoin rally to continue further.

BTC Price

At the time of writing, Bitcoin is trading around $31,000, up 1% in the last week.

Bitcoin Price Chart

BTC has observed some rise during the past day | Source: BTCUSD on TradingView

Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com

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