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On-chain data shows that Bitcoin’s profit-taking has skyrocketed after the cryptocurrency’s price briefly surpassed $27,000.
Bitcoin: 2.4 times as much profit and loss
According to data from the Santiment chain analysis firm, BTC has not seen this level of profit since December 2020. The relevant indicator is the ratio of the daily volume of on-chain transactions in profit to loss.” As the name suggests, it measures the ratio of the number of winning bitcoin transactions to the number of losing transactions.
🤑 With him #Bitcoin jumping over $27k for the first time since June 12, there are 2.4x as many profit transactions as loss transactions on the $BTC network from Wednesday. Markets are very polarized with #FOMO and release the fear that both will happen at the same time. https://t.co/riPv1JYnfg pic.twitter.com/AsZ3485KDR
— Santiment (@santimentfeed) March 17, 2023
The metric provides insight into whether or not more profits are currently being made than losses are being made in the market. The indicator has a positive value when the amount of profit is higher. Otherwise it is negative.
The indicator works by going through the chain history of each coin sold/transferred to see the price it was last transferred at. If the previous selling price for a coin was below the current BTC value, it was replaced by a profit – so your transaction is counted towards profit volume. If the last price is higher than the current value, selling the coin adds to the loss amount.
Totally inflated profit/loss ratio
The chart below shows the evolution of the daily on-chain transaction volume ratio between profit and loss for Bitcoin and Ethereum over the past year:
The chart above shows that the Bitcoin P/L volume ratio has been completely inflated over the past few days. With the recent price rise above $27,000, the indicator is seeing an even stronger surge.
During this rise, the indicator reached a value of around 1.4. This means that the transaction volume when taking profits is about 2.4 times higher than when taking losses. This indicator value is the highest since December 2020, when the 2021 bull run was in its early stages.
This high profit taking number indicates that investors are afraid of falling prices at the moment and therefore rush to take profit when the price exceeded $27,000. Selling pressure from this profit taking was likely the reason for the temporary pullback to $26,000.
The chart shows that Ethereum’s profit margin has also increased significantly over the past few days. Still, the indicator hit the cryptocurrency’s highest reading since mid-2023, just a little further behind Bitcoin.
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Text credit: Bitcoinist
Last updated on March 18, 2023
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