As a seasoned researcher with years of experience in studying the crypto market, I find myself consistently intrigued by the dynamics that play out within the Bitcoin community. The latest data from IntoTheBlock has once again sparked my curiosity, particularly the revelation that approximately 75% of Bitcoin addresses are still holding net gains.
Analyzing on-chain information can help determine what portion of all Bitcoin users currently holds a profit, considering the recent dip in the digital currency’s value.
Bitcoin Has This Many Addresses Still Holding Net Gains
On their latest update at X, the market analysis platform IntoTheBlock delves into the current financial situation of Bitcoin investors following the recent crypto downturn.
Here, we’re focusing on the “Past Profit/Loss Position,” a metric derived from blockchain data. It calculates the proportion of wallets in the network that have accumulated profits or incurred losses.
As someone who has been actively involved in the cryptocurrency market for several years now, I can tell you that one of the most interesting metrics I’ve come across is the cost basis calculation. This method works by examining the transaction history of each address on the network to determine the average price at which it bought its coins. From my personal experience, this metric can provide valuable insights into an investor’s potential profits or losses. If the cost basis for any given address is lower than the current market value of the asset, then it’s safe to assume that the address holder has a net unrealized profit. This information can be useful in making informed investment decisions and understanding the overall trends within the market.
In a similar manner, wallets of the other category can be likened to being submerged underwater. While one type of addresses is referred to as “in the money” by IntoTheBlock, the other group is termed as “out of the money.”
Investments whose cost basis matches the current market price of the cryptocurrency are simply neither making a profit nor incurring a loss; they’re referred to as being “at breakeven” or “at the money.”
As a seasoned investor with years of experience under my belt, I’ve come to appreciate the value of analyzing trends such as the Historical In/Out of the Money chart shared by the analytics firm. This chart provides insightful data on market behavior since the start of the year, and I find it particularly helpful in making informed investment decisions. By understanding these trends, I can better predict potential opportunities and risks, ultimately contributing to my financial growth and stability.
It’s clear from the chart that most Bitcoin wallets have mostly been earning profits over the course of the year, due to the price increase the cryptocurrency experienced during this period.
Recently, the price drop down to $50,000 has stirred things up significantly, causing a substantial number of investors to experience losses. At present, approximately 75% of users are profitable, which translates to around 39 million wallets or addresses.
Previously, Bitcoin’s profitability for investors was as high as it is now only in January. It’s worth noting that Bitcoin hit a low near $39,000, coinciding with a point where the gain-to-loss ratio dropped to its current level.
Historically, it’s been observed that Bitcoin tends to hit bottoms when the profitability among holders is minimal. This is because those who are in profit are more inclined to sell their coins, which could potentially lead to a massive selloff. Conversely, when profitability decreases, the urge to sell for profits reduces. As such, Bitcoin often recovers more easily when its profitability drops significantly enough.
To put it simply, having 75% of addresses generating a profit isn’t necessarily a small figure, especially considering that in bull markets, this percentage can be substantial enough to mark market bottoms. This is because during these periods, there’s often a significant demand for buying to offset selling pressure.
It’s yet uncertain whether the present Bitcoin profitability will stop the decline as it did in January, or if we should expect further drops.
BTC Price
At the time of writing, Bitcoin is floating around $50,100, down more than 28% over the past week.
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2024-08-06 05:42