The majority of the market, including Bitcoin, has been in a state of ecstasy over the last week. As a result, the king coin has reached a new high. Investors are attempting to capitalise on this chance in order to obtain as much BTC as possible. However, the crucial question is whether they should be purchasing BTC at this moment.
Bitcoin’s dosage
Right now, the market is in a bullish mood. Following that, bullish trajectories are being seen in Bitcoin and altcoins. Indeed, just a few days ago, the king coin hit a new all-time high of $67.5k, prompting a purchasing frenzy among investors.
Bitcoin price action | Source: TradingView
In the last 30 days, while BTC rose by 25.22%, investors bought out more than 50k BTC, worth $3.3 billion. As a result, the cumulative supply sitting on exchanges reached a three-year low of 2.4 million BTC.
Bitcoin exchanges’ balance | Source: TradingView
However, apart from the buying, Bitcoin is also being sold quickly. It has been changing hands frequently. As a result of which, transaction volumes have been averaging at $250 billion for over a month now.
Bitcoin transaction volume | Source: Intotheblock
Consequently, about 98.5% of all supply is in profit at the moment. This means that only 283,037 BTC is not in profit. Now, this can be taken as both a good and a dangerous signal.
Bitcoin supply in profit | Source: Glassnode
Well, a good signal because obviously, holders are in profits.
Further, a dangerous signal because this is an indication of the creation of a market top which when last created on 20 October had led to a $7.5k, or a 11.4% drop in price (ref. Bitcoin price action image).
However, this isn’t the only reason why one shouldn’t be buying. To dig deep, reserve risk, at the time of writing, stood at a six-month high. This meant that perhaps BTC was not very attractive as an asset at the moment.
Bitcoin reserve risk | Source: Glassnode
Thus, the only way for the market top to cool down is for some supply to lose profitability, which can be achieved only by some correction. But hopefully, whenever it arrives it won’t be too challenging.
