On-chain data shows that bitcoin profit-taking increased after the cryptocurrency price briefly broke above the $27,000 level.
Bitcoin saw 2.4 times as many profit transfers as losses
According to data from on-chain analytics firm VirtueThis level of profit taking has not been seen since December 2020. The relevant indicator here is the “ratio of profit to loss of daily on-chain transaction volume”, which, as its name already suggests, measures the ratio between the volume of bitcoin traded. Profit making transactions and loss making transactions.
This metric tells us whether the market is booking more profits than booking losses. The indicator has a positive value when the amount of profit is high. Otherwise, it is negative.
The indicator works by going through the on-chain history of each coin being sold/transferred to see at what price it was last transferred. If this previous selling price for a coin was less than the BTC price it is currently at, then this particular coin went into profit, and thus, its transaction is counted under the amount of profit. Similarly, if the last price exceeds the latest price, the sale of the coin contributes to the lost volume.
Now, here is a chart that shows the trend in the ratio of daily on-chain transaction volume in profit for Bitcoin as well as Ethereum over the past year:
The values of the two metrics seem to have been relatively high in the recent past Source: condolences on twitter
The above graph shows that the Bitcoin gain-to-loss volume ratio has been on a whole up in the past few days. With the latest surge in price above the $27,000 level (which only lasted a short time before the coin dropped below the mark), the indicator has seen an even sharper spike.
In this surge, the metric has attained a value of approximately 1.4, which suggests that the volume of profit-taking transactions is approximately 2.4 times higher than that of loss-making transactions. This indicator’s level is the highest it has been since December 2020, when the 2021 bull run was in its early stages.
This high profit-taking volume suggests that investors’ fears have just subsided, and hence, they rushed to book some profits as soon as the price broke above the $27,000 level. Selling pressure from these profit-takers was likely behind the pullback towards the $26,000 level.
The chart shows that the volume of takers for Ethereum has also increased significantly over the past few days. Nevertheless, the cryptocurrency is only looking at its highest value for the indicator since mid-2023, and is only slightly further ahead than is the case with bitcoin.
btc price
At the time of writing, bitcoin is trading around $26,800, up 34% over the past week.
The asset appears to have risen sharply in value over the past 24 hours. Source: BTCUSD on TradingView
Featured Image from Kanchanara on Unsplash.com, Charts from TradingView.com, Santiment.net
