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Bitcoin is on a recent upward trend. What on-chain information says about BTC’s future.
Bitcoin’s Realized Loss/Profit Ratio Can Provide Insights Into Broader Dynamics
The on-chain analysis firm has released its weekly report. Glassnode Has discussed the latest trend in the Realized Profit/Loss Ratio Bitcoin can serve as an indicator for analyzing how investors respond to the price fluctuations.
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As its name suggests, it measures the difference between the profit or loss realized by all the addresses.
It works by looking up the previous transaction history for each coin sold in the network. The price that it was purchased at before this sale is then used to calculate the indicator. The indicator includes the previous selling price if it is lower than the current spot price of any token.
This indicator assumes that the profit total realized from the sale of a coin equals the difference in price between two coins. This indicator takes the total of all the coins in the profit volume, and adds them together to get the overall profit realized across the entire blockchain.
It is also possible to calculate the realized profit/loss ratio by using the previous transaction values of tokens of opposite types (that are, those with a value greater than the spot price). After that, the ratio is used to determine the total situation of a sector.
Bitcoin experienced bearish market action in recent months. This is what the investor’s trading behaviour has looked like during this time, based on the realized profit/loss ratio:
The chart shows that the indicator dropped below the mark of 1 during BTC’s most recent lows. The value of this area corresponds with loss-taking dominating over profit-taking.
“This imbalance typically marks a degree of seller exhaustion, where downside momentum fades as sell-side pressure is absorbed,” Glassnode is a great example of this. This is why. capitulation BTC tends to arrive at local bottoms.
The graph shows that cryptocurrency has also benefitted from the effect of recent loss realizations, with its price finding a recovery following each one.
The Bitcoin rebound has not, so far, been consistent. They will eventually lead to a proper return of bullish momentum or are they just temporary? dead-cat bounces Are we on our way down? For the answer, the firm used the long-term perspective of the Ratio of Realized Loss/Profit.
In the chart above, you can see that the simple moving average 90 days (SMA) for the Bitcoin Realized Gain/Loss ratio has sharply been declining in recent months, in spite of the sudden jump in realizing profits on the short term view.
“These brief profit-driven surges have failed to reverse the broader downtrend, suggesting that the macro picture remains one of generally weaker liquidity and deteriorating investor profitability,” Glassnode Notes
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As for the question of whether Bitcoin’s recent rebound has seen a change towards bullishness, it is not clear, at least in terms of the ratio between the realized profit and loss.
BTC price
Bitcoin’s price is currently around $83,600. It has fallen almost 2% since the previous seven days.
Charts from TradingView.com and Glassnode.com. Featured Image: Dall-E.
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Source: www.newsbtc.com
