According to CryptoQuant analyst Darkfost, the share of Bitcoin’s active supply that is in profit has fallen below 45%. “Active” here refers to coins that have moved within the past 10 years. At the start of October, this metric was still around 60%.
I work on mathematical modeling of economic processes, so I look at this metric a little differently from most headlines:
1. It isn’t a signal independent of price. Each coin carries the price it last moved at, and the share of supply in profit is calculated by comparing the current price with that cost distribution. A drop from around 60% to below 45% in roughly six weeks tells us how many coins were bought above the current price—not what happens next.
2. Excluding coins that haven’t moved in more than 10 years is a reasonable modeling choice. Many of these old coins may be lost, and would otherwise show as “in profit” forever, making the market look healthier than it really is.
3. The rule of thumb that “a drop below 40% often corresponds to a cycle low” is based on only a handful of cycles. With such a small sample, it can serve as context, but not as a trigger.
What I’d rather look at is whether coins that are at a loss are actually moving to exchanges, or just sitting still.
Do you use the supply-in-profit metric in your analysis, or do you think it’s just another way of describing price?
#BitcoinActiveSupplyInProfitDropsBelow45% #OnChain $BTC
I work on mathematical modeling of economic processes, so I look at this metric a little differently from most headlines:
1. It isn’t a signal independent of price. Each coin carries the price it last moved at, and the share of supply in profit is calculated by comparing the current price with that cost distribution. A drop from around 60% to below 45% in roughly six weeks tells us how many coins were bought above the current price—not what happens next.
2. Excluding coins that haven’t moved in more than 10 years is a reasonable modeling choice. Many of these old coins may be lost, and would otherwise show as “in profit” forever, making the market look healthier than it really is.
3. The rule of thumb that “a drop below 40% often corresponds to a cycle low” is based on only a handful of cycles. With such a small sample, it can serve as context, but not as a trigger.
What I’d rather look at is whether coins that are at a loss are actually moving to exchanges, or just sitting still.
Do you use the supply-in-profit metric in your analysis, or do you think it’s just another way of describing price?
#BitcoinActiveSupplyInProfitDropsBelow45% #OnChain $BTC