Bitcoin, the world’s leading cryptocurrency, has recently experienced a surge in value, leading to a positive return for the majority of its holders. The latest Bitfinex Alpha report reveals that over 83% of the BTC supply is currently held at a profit. This percentage is the highest since Bitcoin’s all-time high in November 2021, when it reached a staggering $68,000. While this may seem like a positive sign for investors, it is important to delve deeper into the details.
Analyzing Unrealized Profits
Unrealized profit refers to the difference between an asset’s current value and its original purchase price. According to data from Glassnode, approximately 16.366 million BTC, which accounts for around 83.7% of the total circulating supply, is currently in profit. This percentage is significantly higher than the long-term average of 74% and is approaching the upper limit of the +1 standard deviation band, currently around 90%. This suggests that the cryptocurrency market is in a relatively strong position.
However, it is worth noting that despite the number of bitcoins in profit, on-chain metrics indicate a decline in the activity of long-term holders (LTHs). These investors seem to be more inclined to hold onto their assets rather than realizing their gains. This behavior can be seen in the significant portion of BTC’s circulating supply that has remained dormant for a year. Approximately 70.35% of the total BTC supply, equivalent to 13.65 million BTC, has not been transacted or moved in the past year.
Implications of Dormant Supply
The existence of a substantial amount of dormant supply suggests a stronger base of long-term holders and a reduction in speculative trading. When LTHs maintain their positions and short-term holder (STH) supply declines, it indicates a more stable market. However, it is important to carefully observe market trends to understand how this may evolve.
Bitcoin’s current all-time high coincides with the digital asset’s velocity, which currently sits at a historically low level of 15.78. The velocity metric measures the frequency at which BTC is traded or used for transactions. In comparison, during the last bear market cycle, the velocity reached 80. This suggests that Bitcoin is being held onto more tightly by investors, as they anticipate further price increases.
As the market enters a bullish phase, it is anticipated that Bitcoin’s velocity will begin to rise, and the amount of dormant Bitcoin will decrease. This could be an indication of increased trading activity and a potential shift in the behavior of long-term holders. However, it is essential to keep a close eye on these developments to assess the sustainability of Bitcoin’s current momentum.
While the majority of Bitcoin holders are currently enjoying positive returns on their investments, it is crucial to examine the underlying behavior and market dynamics. The high percentage of BTC in profit suggests a relatively strong crypto market, but the decline in activity among long-term holders indicates a preference for holding rather than realizing gains. The significant amount of dormant Bitcoin further supports this notion. As Bitcoin’s price continues to climb, it is likely that the velocity will rise, and dormant Bitcoin will gradually decrease. By closely monitoring these trends, investors and analysts will gain valuable insights into the future trajectory of Bitcoin.
