Understanding Bitcoin’s profitability in today’s market

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Bitcoin occasionally rallies, trends shift, and new levels are established. But this rally, in particular, is very important right now because it provided much-needed relief from the previous dips. Overall, there is strong evidence of a short-term bull market.

Bitcoin appears to be profitable.

Observing Bitcoin’s total supply in profit is required to gain perspective on this profitability. Profitability increased for the first time in over 45 days, after reaching a low of 12.34 million BTC / 66 percent of total existing supply just last week. This week’s 11.2% jump added 1.2 million BTC to that supply creating a positive atmosphere for traders. Now that over 77% of circulating Bitcoin is profitable, naturally, profits would be better as well.

That is indeed the case. Profits can be seen dominating the market on the nett realised profit/loss chart. On July 26, the green line reached $1.8 billion. Profits increased by 83 percent, lifting the indicator above the $30 million mark set on July 25. In other words, as realised profits reached a 79-day high, investors were able to recoup a significant portion of the losses they had been experiencing for some time.

Bitcoin shows profits at a 2 month high | Source: Glassnode

On July 26, the total transfer volume increased by 1.1 million BTC. This sharp increase reflects increased investor participation as a result of the price increase. This also demonstrates how cautious investors were, as volumes increased only after Bitcoin reached a high of $40k, not before.

See also  Altcoins are soaring, while Bitcoin bulls are gaining momentum in preparation for an attack on $48,000.

Bitcoin exchange zone

The MVRV (market value to realised value) ratio compares a coin’s spot valuation to its on-chain cost basis. Thus, when previous instances are considered as references, the type of market such rallies lead to will be better understood. Historically, MVRV ratios only reached these levels in these circumstances –

  1. Early bull cycle where prices bottomed on a macro scale and money accumulators returned to an appreciable level.
  2. Mid-bear cycle where investors’ profits fall before capitulation.
  3. Double pump where mid-cycle shake-up is observed.

Bitcoin MVRV ratio | Source: Glassnode

When the market reverses the macro trend and resumes its bull run, a resemblance to 2013’s “double pump” can be seen. Furthermore, investor sentiments may improve as NUPL shows the king coin breaking its two-month-long downtrend, bringing it closer to a more positive zone of belief-denial.

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