Bitcoin Bull Run Threatened by Supply-in-Profit Metric Fluctuations

On-chain data suggests that the “Bitcoin Supply in Profit” indicator has recently formed a pattern that might threaten the ongoing bull run.

According to an analysis in a recent CryptoQuant Quicktake post, the current “Supply in Profit” trend could indicate that Bitcoin is entering a critical transition zone. The “Supply in Profit” metric tracks the percentage of circulating Bitcoin that holds some net unrealized profit. It calculates this by examining the transfer history of each Bitcoin to determine the price at which it was last moved. If a Bitcoin’s last transfer price is lower than the current spot price, it is considered to be in profit.

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Recently, the Bitcoin Supply in Profit has fluctuated into the “transition” zone multiple times. The latest data shows that 85% of all circulating Bitcoin is currently in profit, a significant marker historically linked to bull market phases. This high value was achieved following a price recovery to the $64,000 level, recovering from a dip below the 80% mark, which had placed it in the transition zone between bull and bear phases.

However, this recovery might not be as promising as it seems. The pattern of dipping into the transition zone followed by a short recovery was also seen in July, a surge that was short-lived. The overall downward trajectory of the Bitcoin Supply in Profit metric over the past few months hints at a potential for another decline into the transition zone. Should this happen, Bitcoin could face a downturn that might lead to a new bear market.

In the last seven days, Bitcoin has surged nearly 10%, bringing its price to $63,900. This increase in price has contributed to the current state of the Supply in Profit metric. Nevertheless, only time will tell how Bitcoin’s price and the Supply in Profit will evolve in the forthcoming days.