32.3% of Bitcoin supply has returned to profit by 2023
Data from Glassnode shows that an additional 32.3% of the Bitcoin supply has entered a profit state with the 2023 rally so far.
About 77% of the total Bitcoin supply is now in surplus
According to the latest weekly report from Glassnode, a total of 6.2 million BTC has returned to the green this year. The relevant indicator here is the “percent supply in profit”, which tells us what percentage of the Bitcoin supply currently has an amount of unrealized profit.
The metric works by going through the chain history of each coin in the circulating supply and checking what price it was last moved to. If this previous price of a coin was less than the current BTC value, that specific coin is making profit right now and the indicator adds it to its value.
Related reading: Bitcoin falls below $30,000 after overheated futures market
Generally, the higher the value of the percentage contribution in profit, the more likely it is for the investors to sell and reap some of the gains they have accumulated. Because of this reason, peaks become more likely to form as the value of the metric increases.
On the other hand, low values of the indicator suggest that a large part of the supply is currently in a loss, and therefore the holders do not have much incentive to sell their coins.
Now, here is a chart that shows the trend of the 7-day exponential moving average (EMA) Bitcoin percentage return in profit over the entire history of the cryptocurrency:
The 7-day EMA value of the metric seems to have surged in recent days | Source: Glassnode's The Week Onchain - Week 16, 2023
As shown in the graph above, the 7-day EMA Bitcoin percentage supply had plunged to quite low levels during the bear market last year when several crashes submerged a large number of investors.
The indicator hit its lowest point after the crash due to the collapse of the cryptocurrency exchange FTX, when only 44.7% of the supply (about 8.6 million BTC) remained in profit.
However, with the start of the rally this year, the metric has naturally shown some strong recovery, and in total around 77% of the Bitcoin supply (14.8 million BTC) is in surplus now.
Compared to the start of the year, an additional 6.2 million BTC has come into surplus, representing around 32.3% of the total BTC supply. This sharp increase suggests that a large part of the supply changed hands below the current price level.
Historically, bear market bottoms have formed when investors have capitulated after incurring large losses. This is because during such capitulation events, the supply these underwater investors previously held moves into the hands of holders with a stronger conviction.
The latest trend in the offer in profit may indicate that such a detoxification may have taken place now, as a large part of the holders now have their cost basis at the lower bear market prices.
BTC price
At the time of writing, Bitcoin is trading around $29,900, up 1% in the past week.
Looks like the price of the asset has gone down during the last two days | Source: BTCUSD on TradingView
Featured image from André François McKenzie at Unsplash.com, charts from TradingView.com, Glassnode.com
