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Glassnode data suggests that Bitcoin is currently in the historic transition phase from a bear market to a bull market.
Bitcoin just before the bull run?
According to a recent report by Glassnode, BTC’s price-to-supply correlation tends to fall below a 0.75 multiple during transitional periods.
The “supply in profit” is an indicator that measures the percentage of the total bitcoin supply that is currently in profit.
The metric works by looking at the chain history of each coin. In this way you can determine the price at which it was last moved. If that past selling price is lower than a coin’s current BTC value, that particular coin currently has some unrealized gains.
The correlation between the cryptocurrency’s price and its profit supply will shed light on whether or not the two metrics are moving in the same direction.
Here is a chart showing the trend of this bitcoin correlation over the history of the cryptocurrency:
Bitcoin: Glassnode charts offer hope
Whenever the correlation is positive, it means that price and supply are moving in the same direction. On the other hand, negative values mean that they move in the opposite direction.
As you can see in the chart above, Bitcoin has historically had readings above 0.9 most of the time in each of the previous price cycles.
However, during periods of transition from bull markets to bear markets (and vice versa), the indicator tends to fall below 0.75 several times.
According to the report, these variations occur during bear-to-bull transitions as late bear markets consume sellers. On the other hand, the remaining investors are reluctant to reallocate their funds out of frustration – and this reduces the correlation between price and supply in profit.
In the opposite phases, the profit supply generally increases to almost 100% (when the price rises to a new ATH), which reduces the correlation with the price.
Recently, the indicator has fallen below the 0.75 threshold several times. This suggests that Bitcoin is currently in the historical bear/bull transition zone.
What is the price of bitcoin doing?
Currently (at the time of writing this article) the price of Bitcoin is hovering around $18.7k. That’s a decrease of 1.59% in the last 24 hours. In the last month, however, the cryptocurrency has lost 6.39% in value.
Text credit: Newsbtc
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