A 30-day Exponential Moving Average of the number of Bitcoins that are “in profit” – i.e. were acquired at a time when the BTC price was lower – hit a 2-month high on the 19th of January, according to crypto data and on-chain analytics firm Glassnode.
In wake of the latest Bitcoin rally that has seen the world’s largest cryptocurrency by market capitalization regain the $21,000 following a near 30% rally since the start of the month, Glassnode’s 30-day EMA of Bitcoin Supply in Profit rose to over 10.5 million coins. That’s its highest since last September. At present, there are 19.27 million Bitcoins in circulation of a total 21 million that can ever be mined.
As a result, the Supply in Profit Trend is now positive, says Glassnode. “During positive market trends, the volume of BTC supply that was acquired at lower prices tends to increase, putting more supply into an unrealized profit,” the crypto analytics firm explains.
“As such, macro trend shifts in the volume of Supply in Profit can signal when a heavy concentration of investor cost basis has recently transitioned between unrealized profit, or loss,” Glassnode adds. “Often these occur near macro market cycle changes”.
Supply in Profit Hits Highest Since May 2022
The above indicator uses an EMA in order to give a less volatile result, potentially functioning as a better signal of a turn in the market. But a more basic measure of Supply in Profit also seems to be sending a bullish signal.
According to Glassnode, 66.9% of Bitcoins were in profit on Thursday the 19th of January, up from around 50% at the turn of the year. That means around 12.9 million Bitcoins last moved when the price was lower.
Looking at a longer-term history of Glassnode’s more basic Supply in Profit metric, a recovery from under 50% often occurs ahead of the start of a bull market.
Other Signals Also Flashing Green
Multiple other technical and on-chain indicators have started flashing green that the bear market of 2022 might be over. For example, Bitcoin’s latest push higher that has seen it recover above $21,000 from its end of 2022 levels around $17,000 has seen the world’s largest cryptocurrency by market capitalization break back to the north of its 200-Day Moving Average and Realized Price, both of which sit just under $20,000.
Momentum in new addresses also recently took a turn for the better, with the 30-day simple moving average (SMA) recently jumping above the 200-day SMA, a shift which often occurs at the start of a Bitcoin bull market.
Meanwhile, according to analysis from pseudonymous Twitter account @CryptoHornHairs, Bitcoin appears to be tracking almost exactly in line with a long-term market cycle that repeats itself roughly every four years. According to @CryptoHornHairs, Bitcoin is at the beginning of the bullish stage of the cycle, having just come through a 364-day downturn.
But Bulls Beware, Revenue From Fees Momentum Isn’t There
Glassnode’s Revenue From Fees Multiple still has a negative 2-year Z-score of around -0.41. The Z-score is the number of standard deviations above or below the mean of a data sample. In this instance, Glassnode’s Z-score is the number of standard deviations above or below the mean Bitcoin Fee Revenue of the last 2-years.
“A sustained uptick in fee revenue as a proportion of the total reward indicates that Bitcoin blocks are full, and there is growing demand for transaction activity,” the crypto analytics firm states. “Given the constrained blocksize of Bitcoin, this has historically provided a valuable early indicator of a macro trend shift in the network demand profile”. Bitcoin’s weak Fee Revenue momentum should be a red flag for the bulls, as it implies weak on-chain activity.
So Where Next For BTC?
So, all the signals aren’t quite there yet to imply a sustained rapid Bitcoin rally. But bulls should fear not. 2023 is (probably) going to be nothing like 2022. Inflation in the US inflation and growth are easing rapidly and the bulk of the US Federal Reserve’s interest rate hiking cycle has likely already been completed. Markets and many analysts expect only a few more hikes, despite still hawkish talk from the world’s most important central bank, and then an easing bias going into 2024.
Many crypto analysts hope that the deleveraging cycle that has seen the collapse of a number of industry titans from Three Arrows Capital, Celsius, FTX and, most recently, Genesis, is nearing maturity. Analysts are also hoping for positive regulatory developments in key markets such as the US this year, such as a resolution on the SEC vs Ripple lawsuit and further progress towards a broad crypto regulation bill.
It’s probably unreasonable to expect the pace of this month’s rally to continue, but a continued crawl higher (assuming no further economic/industry shocks) could well be on the cards. In the short term, a break above $21,500 would open the door to a rally towards the key $25,500 balance area.