On-chain data shows that the ‘trader’ group’s Bitcoin profits have soared recently. Here you can see if they are as high as the last peak.
1-3 month old Bitcoin investors are currently up 47%
As Julio Moreno, head of CryptoQuant Research, explained in a new one after on X, traders’ unrealized profits have recently reached high levels. The on-chain metric of interest here is the “Profit/loss margin”, which tells us about the net profit or loss held by Bitcoin investors.
This indicator works by going through the transaction history of all coins in circulation to find the price at which they last moved. If this previous transfer price for a token was lower than the current cash value, that particular coin can be assumed to make an unrealized gain.
Likewise, coins of the opposite type are assumed to incur some net loss. The profit/loss margin sums up these gains and losses for the entire network and represents the net situation.
In the context of the current topic, the profit/loss margin of only one segment of BTC investors matters: the traders. These investors bought their coins at least one month and three months ago.
Here is the chart shared by Moreno showing the trend in Bitcoin profit/loss margin for the BTC traders over the past year:
Looks like the value of the metric has shot up in recent days | Source: @jjcmoreno on X
As shown in the chart above, traders’ Bitcoin profit/loss margin has recently surged high into the positive zone, implying that these investors are now booking a significant amount of profit.
More specifically, this cohort has recently achieved a net gain of 47% price increase. Historically, the higher investors’ gains, the more likely there has been a top for the cryptocurrency’s price.
The reason behind this is that keepers are increasingly tempted to harvest profit taking the greater the size of their profits. Traders in particular are likely to participate in the selling, as this cohort includes relatively inexperienced hands who are quick to panic.
The chart shows that the top occurred in March when this indicator was around 69%. So far the statistic hasn’t gone that high.
That said, BTC also peaked in December last year, when traders’ profit/loss margin was 48%, which is just 1% more than its last value.
It remains to be seen whether the Bitcoin rally will continue despite the risk of profit-taking by traders, or whether there will be a cooldown first.
BTC price
At the time of writing, Bitcoin is trading around $88,800, up more than 16% in the past week.
The price of the coin seems to have been climbing up over the last few days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com