A recent report from Bitfinex Alpha reveals that a majority of Bitcoin holders are currently experiencing positive returns on their investments. The report states that more than 83% of the BTC supply is currently held at a profit. This is the highest percentage of profitable holdings since November 2021 when Bitcoin reached its all-time high of $68,000. The recent surge in Bitcoin’s price has resulted in a significant portion of the circulating supply being in profit. However, the holders seem hesitant to realize these gains.
Unrealized Profits and Circulating Supply
To understand the extent of the holders’ unrealized profit, it is essential to consider the concept itself. Unrealized profit refers to the difference between Bitcoin’s current price and the price at which it was originally purchased. According to analysts, citing data from Glassnode, approximately 83.7% of the total circulating supply, equivalent to 16.366 million BTC, is currently in profit. This percentage is notably higher than the historical average of 74%, conveying the relative strength of the crypto market. Moreover, the current percentage is approaching the upper limit of the +1 standard deviation band, which stands at around 90%.
While many Bitcoin holders are experiencing profitable positions, on-chain metrics indicate a decline in the activity of long-term holders (LTHs). This suggests that this particular group of investors is inclined to hold onto their assets rather than sell them for profit. The data shows that a significant portion of BTC’s circulating supply has remained dormant for over a year, with approximately 13.65 million BTC (70.35% of the supply) remaining untransacted or unmoved. The increased presence of LTHs reflects a stronger foundation for Bitcoin, accompanied by a reduction in speculative trading.
Bitcoin’s current velocity, a metric measuring the frequency of BTC being traded or used for transactions, stands at a historically low level of 15.78. Comparatively, during the previous bear market cycle, the velocity reached 80. This low level suggests that Bitcoin is not being frequently traded as the market enters a bullish phase. It is expected that as Bitcoin’s price continues to climb, the velocity will gradually rise along with a decrease in the amount of dormant Bitcoin. This correlation indicates that as the market strengthens, holders may eventually choose to realize their profits.
Despite a vast majority of Bitcoin holders currently in profit, a significant portion of these profits remains unrealized. The data suggests that holders are hesitant to sell their assets, potentially expecting even higher returns as the market continues to exhibit strength. This trend is supported by the increased presence of long-term holders and reduced speculative trading. As Bitcoin’s velocity remains at a historically low level, it indicates a subdued trading activity. However, as the market progresses, it is anticipated that the velocity will rise, and more Bitcoin will be put into circulation as holders begin to realize their profits.