Understanding Bitcoin's price movements has always been a challenging process for investors. In addition to traditional technical analysis tools, on-chain data plays a critical role in assessing the balance of supply and demand in the market, the sentiment of investors, and overall market dynamics. Recently, declines in Bitcoin's "Supply in Profit," along with increases in liquidity accumulation, provide insights into how the market may move in the future.

Supply in Profit: The Declines and Increases in Bitcoin's Profitable Supply

"Supply in Profit" is a crucial on-chain metric that shows how much of the current Bitcoin supply is in profit based on the current price. Represented in blue on the chart, this metric is directly correlated with Bitcoin's price fluctuations. Investors are in profit when Bitcoin's price rises above their purchase price, increasing the profitable supply.

However, currently, there is a significant decline in profitable supply due to the recent drop in Bitcoin’s price. This indicates that many investors in the market are at a loss, and those who are still in profit are reducing the selling pressure, stabilizing the market. A reduction in profitable supply suggests that a large portion of investors are in a loss zone. At the same time, this may signal a potential reversal opportunity.

At present, Supply in Profit has approached the Psychological Inflection Line on the chart. This area marks levels that investors view as emotionally critical. The line is often used as support and resistance zones in the long term, providing key clues about the market’s direction.

Psychological resistance and support levels in Bitcoin shape investor sentiment. If the price surpasses this level, optimism increases; if it breaks below, selling pressure may arise.

In conclusion, we are approaching a critical level. If it is surpassed, it could be positive for Bitcoin's price, and a market recovery may follow.

Written by datascope