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09 October, 2024

Bitcoin Supply in Loss Nears 20%: Could This Be a Bullish Signal?

09 October, 2024

Bitcoin Supply in Loss Surges: A Bullish Indicator?

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Recent on-chain data reveals that the Bitcoin supply in loss has skyrocketed, nearing the 20% mark. This significant increase follows the cryptocurrency’s recent price downturn, prompting analysts to question whether it could signal an upcoming rally.

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The “UTXO Supply in Loss” metric, meticulously tracked by CryptoQuant analyst Axel Adler Jr., provides insights into the percentage of Bitcoin’s Unspent Transaction Outputs (UTXOs) held at a net unrealized loss. To calculate this metric, each UTXO’s on-chain history is examined to determine its last transfer price, which serves as its cost basis. If this cost basis surpasses the current Bitcoin spot price, the UTXO is considered underwater.

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As Bitcoin’s price has retreated from its all-time high (ATH) in March 2023, the Bitcoin UTXO Supply in Loss has steadily climbed. The 90-day moving average (MA) of the indicator has now approached the 20% threshold, a level previously observed during past cycles. According to Axel, “In previous cycles, similar conditions were sometimes followed by a price rally.” This suggests that a price surge could be in the cards for Bitcoin this time as well.

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Why could an increase in the UTXO Supply in Loss be bullish for Bitcoin? The logic lies in the fact that investors holding Bitcoin at a profit are more inclined to sell. As the number of these profitable holders decreases, the likelihood of a selloff diminishes, potentially setting the stage for a price rebound.

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Bitcoin’s price has shown some resilience, briefly pushing beyond the $64,000 level, but it has since retraced to around $62,500. While the market remains volatile, the recent surge in the Bitcoin Supply in Loss adds an intriguing layer to the current price action, potentially suggesting a shift in market sentiment.

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Only time will tell whether this metric will indeed lead to a Bitcoin price rally. However, it serves as a valuable indicator for investors to consider as they navigate the ever-evolving cryptocurrency market.