Recent on-chain data indicates a notable increase in the percentage of Bitcoin supply held at a loss, nearing the 20% threshold. This uptick follows the recent downturn in Bitcoin’s price, sparking interest and analysis within the cryptocurrency community.
Analyzing the Spike in Bitcoin UTXO Supply in Loss
In a recent post on CryptoQuant, analyst Axel Adler Jr delves into the emerging trend concerning the Bitcoin Unspent Transaction Output (UTXO) Supply in Loss. The “UTXO Supply in Loss” is an indicator that quantifies the proportion of Bitcoin tokens in circulation that are currently held at a net unrealized loss.
How the UTXO Supply in Loss Works
The mechanism behind this indicator involves scrutinizing the on-chain transaction history of each UTXO to determine the last price at which it was moved. This last transaction price is typically considered its cost basis. When the cost basis of a UTXO surpasses the current market price of Bitcoin, that UTXO is considered to be “underwater.” The UTXO Supply in Loss aggregates all such UTXOs to calculate what percentage they constitute of the total Bitcoin supply. Conversely, the UTXO Supply in Profit tracks tokens that are held above their cost basis.
Recent Trends in Bitcoin UTXO Supply in Loss
The chart shared by Adler highlights the historical trends of the Bitcoin UTXO Supply in Loss. Notably, this indicator plummeted to zero when Bitcoin reached its all-time high (ATH) earlier this year. At an ATH, all investors theoretically see their investments in profit, causing the UTXO Supply in Loss to diminish. However, the recent bearish trend has caused a resurgence in this metric, bringing it closer to the 20% mark, as shown by the 90-day moving average (MA) in the chart.
Potential Implications for Bitcoin’s Price
Adler notes previous instances where a similar increase in the UTXO Supply in Loss has preceded a price rally for Bitcoin. This suggests that the current situation might eventually lead to a bullish reversal. The rationale behind this theory is straightforward: investors holding Bitcoin at a profit are more inclined to sell, so a reduction in their numbers might decrease the likelihood of a selloff, thus stabilizing or even boosting the price.
Current Bitcoin Price Movements
Bitcoin recently showed signs of recovery, briefly surpassing the $64,000 mark. However, it has since retracted to around $62,500. This fluctuation underscores the ongoing volatility in Bitcoin’s market, influenced by various on-chain and external factors.
In conclusion, the recent increase in the Bitcoin UTXO Supply in Loss is a critical metric for investors and analysts to monitor. Understanding these dynamics can provide valuable insights into potential future price movements and broader market conditions.
