The cryptocurrency landscape is currently marked by significant volatility, and on-chain metrics are proving to be invaluable for investors seeking insights. Analyst James Van Straten has highlighted a particular indicator that has effectively indicated Bitcoin’s lowest points in previous market cycles.
Van Straten cautions that while the idea of “buying the dip” may seem appealing, it can also lead to detrimental outcomes. Nevertheless, those who pursue this strategy have a reliable benchmark: the ratio of Bitcoin’s supply that is either profitable or at a loss.
This specific metric provides insight into market sentiment and investor behavior by assessing how many Bitcoin wallets are operating in profit versus those facing losses based on current pricing trends.
Recent data from on-chain analytics firm Glassnode reveals that around 11.1 million Bitcoins are presently yielding profits, whereas approximately 8.9 million Bitcoins are incurring losses. Historically, the alignment of these two groups has signaled the conclusion of bearish phases in the market; thus, analysts view this convergence as indicative of capitulation and potential long-term investment opportunities.
Historical instances underscore the significance of this indicator. Notable moments where profit and loss levels reached equilibrium include lows around $15,000 following November 2022’s FTX collapse, under $3,000 during March 2020’s COVID-19 crisis, about $3,300 in January 2019, and just above $200 back in 2015. Each of these periods was characterized by substantial selling pressure before marking shifts towards upward trends.
The present scenario indicates a similar convergence between profitable and losing Bitcoin supplies once again emerging as potential bottom formation signals. With Bitcoin hovering near $74,000 currently being monitored closely through this lens helps gauge whether overall market pressures might be subsiding. However, experts emphasize that relying solely on on-chain indicators is insufficient; macroeconomic factors and liquidity conditions remain vital components to consider.
*This information should not be construed as financial advice.