In crypto, indicators like the ‘Supply in Profit’ provide valuable insights into market trends and investor sentiment. CryptoQuant’s latest analysis delves into this indicator, revealing patterns that might suggest we are on the brink of a bullish period for Bitcoin.
Understanding the Supply in Profit Indicator
The Supply in Profit indicator tracks the percentage of Bitcoin that is currently held at a profit—that is, the price at which the coins were bought is lower than the current market price.
This metric becomes particularly significant when Bitcoin’s price exceeds past highs, pushing the indicator toward 100%. This scenario implies that the vast majority of holders could sell their coins for a profit, creating a buoyant market sentiment.
During bull markets, it’s common for this indicator to maintain levels between 90% and 100% over extended periods, ranging from six to twelve months. This sustained high indicates a robust market where investors are generally in profit, bolstering confidence and reducing the likelihood of mass sell-offs.
Source: CryptoaQuant
CryptoQuant has introduced a novel approach by incorporating the ultra-long-term moving average (1,500 DMA) with ±1 standard deviation to better understand this metric over Bitcoin’s cycles, which coincide roughly with its four-year halving events. Observations show that when the Supply in Profit exceeds the upper boundary of this range, it consistently aligns with the onset of major bull markets.
Historically, there’s a precursor phase where the indicator briefly surpasses the +1 standard deviation band before fully entering a bull market. For example, the 2015-2018 cycle lasted 580 days, and the 2019-2022 cycle spanned 280 days.
Currently, we’re about 180 days into a potential bull phase, with the pattern suggesting the bullish trend might extend well beyond three months, especially considering the recent approvals of both BTC and ETH spot ETFs. These financial products are likely to attract significant capital inflows, further supporting a bullish outlook.
How Much Upside Potential Remains?“From the last two cycles, we can see that the bullish trend lasted approximately 300-600 days. If we observe a similar pattern in the current cycle, we can expect the upward momentum to continue for at least another three months.” – By… pic.twitter.com/PEAzevDu1O
— CryptoQuant.com (@cryptoquant_com) May 30, 2024
The Role of ETF Approvals in Sustaining Bullish Momentum
The approval of spot ETFs for Bitcoin and Ethereum marks a pivotal development in the cryptocurrency sector, potentially catalyzing more institutional and retail investment. As these ETFs facilitate easier access to Bitcoin and Ethereum for a broader audience, the influx of new capital could sustain and even accelerate the ongoing bullish trend suggested by the Supply in Profit indicator.
CryptoQuant’s analysis, by linking historical data with current trends, offers a reasoned perspective on the potential continuation of the current market upswing. As the cryptocurrency landscape continues to mature, tools like the Supply in Profit indicator are invaluable for investors looking to understand the dynamics of bull and bear cycles in this volatile market.