The cryptocurrency market has been a whirlwind of activity over the past week, with Bitcoin (BTC) seeing the most notable uptick, climbing over the $30,000 mark for the first time in two months, a crucial psychological milestone that could return much-needed confidence to the market.
At press time, Bitcoin is trading at $30,343.
Over the weekend, Bitcoin managed to maintain the $30,000 level, even briefly surpassing $31,000. This price jump was fueled by a wave of news regarding institutional adoption, which has been a key driver of Bitcoin’s price since the beginning of the year as it indicates growing mainstream acceptance and potential increased demand for the digital asset.
This surge in Bitcoin’s price has increased the profitability of most holders. This is evident when analyzing on-chain data, especially UTXOs in profit. Unspent Transaction Outputs (UTXOs) are the outputs of Bitcoin transactions that have not been spent and can be thought of as individual ‘coins’ or pieces of coins that reside in a Bitcoin wallet. They are crucial when analyzing the market because they provide a snapshot of the economic activity on the Bitcoin network.
Estimating the profit and loss of Bitcoin’s supply is important as it provides insight into the market sentiment and potential future price movements. One way to assess this is by analyzing the number of current UTXOs that are in profit or loss.
Glassnode calculates the number of UTXOs in profit/loss by counting all existing UTXOs whose price at creation time was lower or higher than their current price. To account for the increasing number of UTXOs over time, the data is normalized by the size of the UTXOs to obtain the relative number of UTXOs in profit/loss, i.e., the percentage.
The percentage of UTXOs in profit approaches 100% every time a previous all-time high is broken. According to Glassnode, applying the 50-day simple moving average (SMA) to the data fits the historic data optimally and creates a much better signal that indicates both global and local Bitcoin cycle tops.
Graph showing the percentage of Bitcoin UTXOs in profit from 2018 to 2023 (Source: Glassnode)
CryptoSlate analysis found that 86.24% of Bitcoin UTXOs are currently in profit. This is a sharp spike from 69.59% recorded on June 14 and a slight drop from the 14-month high of 86.8% recorded on June 23. This indicates that most Bitcoin holders are currently profitable, which could significantly affect the market’s future trajectory.
Graph showing the percentage of Bitcoin UTXOs in profit from 26 May to 26 June 2023 (Source: Glassnode)
However, the 50-day simple moving average (SMA) for Bitcoin UTXOs in profit currently stands at 75%, a significant drop from the 82.4% level recorded in May.
The SMA is a commonly used technical indicator that helps smooth out price data by creating a constantly updated average price. In this context, it provides a clearer picture of the overall trend in the profitability of Bitcoin UTXOs over the past 50 days. The drop in the SMA suggests that despite the recent surge in Bitcoin’s price, the overall profitability of UTXOs has been on a downward trend over the past two months.
Graph showing the percentage of Bitcoin UTXOs in profit YTD (Source: Glassnode)
This could be due to a number of factors, including Bitcoin holders selling at a loss or the creation of new UTXOs at higher price levels. However, with the recent price surge pushing the percentage of UTXOs in profit to over 86%, it remains to be seen whether this trend will continue.
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