On-chain data shows the Bitcoin investors are now carrying 121% profits on average. Here’s whether this has been enough for a top in the past. Bitcoin Profitability Index Is Currently Sitting Around 221% In a new post on X, CryptoQuant author Axel Adler Jr has discussed about the latest trend in the Bitcoin Average Profitability Index. The “Average Profitability Index” is an indicator for BTC that compares the asset’s spot value with its realized price. The “realized price” here refers to a measure of the cost basis or acquisition value of the average investor in the Bitcoin market. This metric’s value is determined using on-chain data, with the last price at which each coin in circulation was transacted on the blockchain being taken as its current cost basis. Related Reading: Bitcoin Sentiment Enters Danger Zone: Investors Now Extremely Greedy When the Average Profitability Index is greater than 100%, it means the spot price of the cryptocurrency is currently higher than its realized price. Such a trend suggests the average investor is holding a net amount of profit. On the other hand, the indicator being under this threshold implies the BTC market as a whole is carrying coins at a net unrealized loss. Naturally, the index being exactly equal to 100% indicates the holders as a whole are just breaking-even on their investment. Now, here is a chart that shows the trend in the Bitcoin Average Profitability Index over the past decade: As is visible in the above graph, the Bitcoin Average Profitability Index has registered a notable increase recently as the cryptocurrency’s run to the new all-time high (ATH) price has occurred. The indicator has now reached a value of around 221%, which suggests the investors are in a significant amount of gains. More particularly, the BTC addresses as a whole are in a net profit of 121%. Generally, the higher the profits of the holders get, the more likely they become to fall to the allure of profit-taking. The current Average Profitability Index level is high, but it’s uncertain if it’s high enough for a mass selloff to become a risk. Related Reading: Bitcoin Could Be Ready For ‘Phase 2’ Of This Historical Bull Pattern In the chart, the analyst has marked how high the metric went at the time of the tops of the previous bull runs. It would appear that 2017 peaked at 460%, while 2021 at 395%. So far in the current cycle, the highest that the index has gone was 272%, which happened during the top back in March of this year. Given the fact that the indicator is yet to hit this level, let alone the peaks from the last cycles, it’s possible that Bitcoin still has sufficient room to run, before a top becomes probable. BTC Price At the time of writing, Bitcoin is trading around $76,200, up more than 9% over the past week. Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
Bitcoin has smashed through its all-time highs for the second day in a row, fueled by the recent US election results and a Federal Reserve interest rate cut of 25 basis points. Donald Trump’s victory has brought fresh optimism among investors, with many seeing his pro-business stance as a catalyst for Bitcoin’s ongoing rally. The […]
On-chain data shows the Bitcoin Profitability Index is at 202% right now. Here’s how this compares with past bull runs of the asset. Bitcoin Average Profitability Index Has Been Rising Recently In a new post on X, CryptoQuant author Axel Adler Jr. discussed the latest trend in the Average Profitability Index of Bitcoin. The “Average Profitability Index” is an on-chain indicator that tells us about how the spot price of the asset compares against its realized price. Related Reading: Ethereum Leverage Ratio Reaches Extreme Levels, What It Means The “realized price” here is a measure of the cost basis of the average investor or address on the Bitcoin network. The Average Profitability Index is calculated as a percentage, with the 100% mark corresponding to the spot price being equal to the realized price. When the value of this indicator is greater than 100%, it means the asset is currently trading above the cost basis of the average investor, so the overall market could be assumed to be in a state of profit. On the other hand, it being under this cutoff suggests the holders as a whole are carrying their coins at a net unrealized loss. Now, here is a chart that shows the trend in the Bitcoin Average Profitability Index over the past decade: As displayed in the above graph, the Bitcoin Average Profitability Index has been above 100% since last year, which suggests the investors as a whole have been enjoying profits. The indicator’s value had spiked to particularly high values earlier in this year when the rally towards the new all-time high (ATH) had occurred. With the latest recovery run that the coin has seen, the indicator has been picking up once again, although it’s still a notable distance away from the level seen during the ATH. At present, the BTC Average Profitability Index is floating around 202%, which implies the spot price is double that of the realized price. Historically, the indicator reaching extreme levels has generally led to tops for the asset. This is because the investors’ temptation to participate in profit-taking increases the larger their gains. “When the index rises above 300%, investors are likely to start taking profits actively,” notes the analyst. Related Reading: Bitcoin Active Addresses Finally Growing Again: Bullish Sign? The chart shows that the last two times that the Bitcoin Average Profitability Index surpassed this 300% mark was during the heights of the 2017 and 2021 bull runs. Thus, according to this historical pattern, Bitcoin’s current bullish period may not end until the indicator enters the zone above 300%. BTC Price At the time of writing, Bitcoin is trading at around $67,400, up 1% over the last seven days. Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
On-chain data shows around 95% of all Bitcoin holders are in profit following the latest bullish action that the asset’s price has seen. Very Few Bitcoin Addresses Are Still Underwater In a new post on X, the market intelligence platform IntoTheBlock has shared an update on how the Bitcoin holder’s profitability is currently looking. The analytics firm has made use of on-chain data to determine this. IntoTheBlock has gone through the transaction history of each address on the network to check the average price at which it acquired its coins. Wallets with a cost basis below the current price are assumed to carry some net unrealized profit. Related Reading: Bitcoin Whale Transfers See Massive Spike: Sign Of Profit-Taking? Similarly, addresses of the opposite type are considered to be loss holders. The analytics firm terms the former investors “in the money,” while the latter are “out of the money.” Naturally, the wallets with their average acquisition price equal to the latest spot price of the cryptocurrency would be just breaking even on their investment. They would be said to be “at the money.” Now, here is how the address distribution on the Bitcoin network is like right now across these three categories: As is visible above, around 95% of the existing Bitcoin holders currently have a net profit. About 3% of the remaining are at their break-even level, while the rest 2% are underwater. Thus, the market distribution is currently overwhelmingly skewed towards profit holders. The reason behind this is the recent price rally the asset has gone through. “With 95% of Bitcoin addresses now in profit, market sentiment is booming,” notes IntoTheBlock. “Historically, such levels have signaled strong bullish momentum but can also indicate a potential overextension.” Generally, investors in profit are more likely to sell their coins at any point, so a large amount of them being in the green can raise the chances of a mass selloff occurring with the motive of profit-taking. This is why a high profitability ratio can suggest potential overheated conditions. A huge amount of addresses are in the money right now, so it’s possible that another profit-taking event could happen. It remains to be seen whether demand would be enough to absorb the selling or if a top would take place for Bitcoin. Related Reading: Bitcoin Coinbase Premium Is Negative Despite $68,000 Rally: What It Means On a more bullish note, the Bitcoin inflows to “accumulation addresses” have spiked recently, as CryptoQuant community manager Maartunn has pointed out in an X post. The accumulation addresses refer to the wallets that have no history of selling on the network. These perennial HODLers have just added a massive 56,700 BTC to their wallets, which could suggest they may be starting another phase of accumulation. BTC Price At the time of writing, Bitcoin is trading around $67,400, up more than 11% over the past week. Featured image from Dall-E, IntoTheBlock.com, CryptoQuant.com, chart from TradingView.com