GlassNode: 83% of profitable addresses, Bitcoin is advancing to the "euphoric phase".

作者:CryptoVizArt,Glassnode

编译：Akechi、Annie，达瓴智库

As the Bitcoin market moves away from its all-time high in November 2021, the current share of profitable Bitcoin supply has reached where it was two years ago. However, the total amount of unrealized profits is still modest, so overall, they are still far from enough to motivate long-term investors in the market to lock in their profits.

Summary

• With the market currently trading at yearly highs, 83.6% of the Bitcoin supply in the market is profitable. This is the highest level since November 2021 and is also close to an all-time high.
• However, the size of the unrealized profit is still modest as measured by the difference between the market spot price and the underlying cost of Bitcoin.
• To date, the unrealized profits held by investors are still not enough to incentivize long-term investors to sell their bitcoins, and as a result, the overall supply of bitcoin in the market remains relatively tight.

At the moment, Bitcoin is still maintaining a strong price action, and is currently trading near the highest point of the year, which has exceeded $37,900 this week. There are currently 16.366 million BTC in the market at a profit, equivalent to 83.6% of the circulating supply. This has brought the total amount of profits on these bitcoins to a level similar to the 2021 bull highs.

In this article, we will explore what this situation means for investors’ asset profitability and compare the current similarities and differences with past bull market conditions.

Figure 1: Profit on the Bitcoin supply

Accumulation across the board

Let’s take the accumulation behavior of investors as a starting point to discuss the change in the balance of on-chain wallets. Using the cumulative trend score, we can illustrate why the recent price rally has shown a larger cumulative pattern than other previous rallies this year.

Unlike the first two rallies in 2023, the indicator suggests a strong accumulation range (dark band in the chart below) during the recent rally, while support prices have surged 39% over the past 30 days.

In the image below, we used a 7-day simple moving average to smooth out the differences between individual data points in an effort to improve the visualization of the data:

Figure 2: Bitcoin Accumulation Trend Score (7-Day Moving Average)

Considering that wallets vary in size, we can evaluate them in more detail by subdividing them into different groups. Since the end of October, there has been a clear shift in this trend, and we can see that wallets of all sizes have experienced a large increase in holdings (blue squares in the chart below).

But we also need to see that in 2023, there are still net outflows across multiple wallet groups (red squares in the chart below), suggesting inconsistent behavior across different investor groups. But regardless, this broad-based uptick in accumulation means that strong market performance and a growing inclination for spot ETFs on Bitcoin are boosting investor confidence in the uptrend.

Figure 3: Cumulative trend scores for different groups of wallets

Profitable rally

With the price back hitting its annual highs, Bitcoin, which is currently profitable, already accounts for 83% of the total market supply. From a statistical point of view, this value is historical, as it is already well above the 74% all-time average and will continue to rise to +1 standard deviation in the future (i.e., the number of bitcoins in a profitable state accounts for 90% of the total market supply).

History tells us that when the indicator is above the upper limit, it will coincide with the early stages of the “euphoric phase” of the bull market.

In the figure below, we use the cummean(m1) and cumstd(m1) functions to calculate the mean and standard deviation range for all times.

Figure 4: Profitable Bitcoin in the market

To get a complete picture of current supply profitability, the chart below highlights three typical cycle phases over the past 5 years:

• Found at the bottom (red): Less than 58% (-1 standard) of the Bitcoin in circulation is profitable.
• Bullish/Bearish Shift (Yellow): The market is recovering from the bottom discovery phase or coming back from the euphoric phase, and the amount of Bitcoin generating profits is between 58% and 90% of the market supply.
• Euphoric phase (green): When the price reaches the previous all-time high, more than 90% of the supply is profitable (+1 standard).

Over the past 10 months, the market has been in this phase of a bull/bear market shift, which means it is recovering from the bear market of 2022. For most of 2023, Bitcoin’s market has traded below historical averages, with October’s rally bringing prices above historical averages for the first time.

Figure 5: Bitcoin Profitability Phase

Market volume vs market size

It’s worth noting that the table above measures the number of profit-generating holdings – there is no doubt that the spot price of these profit-generating supplies is lower than their underlying cost. However, this concept is not the same as the size of the unrealized profit held, which assesses the increment between the base cost and the current interest rate.

Unrealized profit is often a more critical variable in the analysis of investor behavior, as it relates to the dollar-denominated profit of the investor’s position.

In our next chart, we apply the same mean and ±1 standard bands to the analysis of unrealized profit. This allows us to directly measure the size of the profit held by investors. This indicator shows how much profit is stored in the market for every dollar of Bitcoin on average.

Unlike the previous Bitcoin trading volume indicator, the scale of unrealized profits has not yet reached a high level consistent with the Great Bull Market phase. It is currently trading at 49% of its historical average, still well below the 60% extreme of the “euphoric phase” triggered by previous bull markets.

This suggests that while the majority of bitcoins in the current supply market are profitable, the underlying cost of most bitcoins is only slightly lower than the current spot price.

Figure 6: Bitcoin’s unrealized profits

The Great Divide

Another notable phenomenon is the widening gap between the amount of supply held by long-term and short-term investors.

As we mentioned in our previous research report, the supply (blue) from long-term investors continues to reach all-time highs, reaching 14.5 million BTC at the time of writing. In contrast, the supply of bitcoin (red) from short-term investors has fallen to 2.3 million BTC, which is essentially at an all-time low.

This dynamic suggests that existing holders are increasingly reluctant to give up their holdings, as they have historically waited for market prices to break through record highs. This can be explained by the fact that investors need higher profit margins to increase their distribution pressure.

Figure 7: Market supply from Bitcoin long/short investors

The road ahead for the market

We have now determined that market profitability is slightly above the statistical midpoint. Next, we’ll explore how these tools can provide a macro blueprint of the future path based on previous cycles.

The first focus we focus on is the supply of Bitcoin from the profit and loss of long-term investors. We note that the supply of long-term investors tends to be significantly cyclical. In the chart below, we provide a model for measuring the strong propensity to spend (red) versus hold (green).

Before the price returns to its all-time high, the supply of bitcoin from long-term investors will go through a long period of reaccumulation, with the total supply showing an overall flat or moderate growth trend.

As the market breaks through the all-time highs of the previous cycle, the momentum to increase spending increases significantly. This has led to a sharp drop in supply from long-term investors, making them inclined to sell their Bitcoin holdings to new buyers at higher and higher prices.

Throughout the 2022 bear market, the market’s performance in the first phase of the bear market was very much in line with past cycles, with a strong climb in the Bitcoin supply from long-term investors, which shows the extraordinary resilience of Bitcoin holders. Although their losses have widened over the last year, however, unlike the 2015-16 and 2018-20 cycles, where prices have fallen and oscillated less due to spending, supply from long-term investors tends to be higher and higher. This illustrates what is stated in the article we discussed earlier about the level of tightness in supply.

Figure 8: Bitcoin supply for long- and short-holding investors in profit/loss states

Using these observations, we revisit the “compass” indicator introduced in a previous article, which measures the spending behavior of long-term investors. It helps split the long and bumpy road between bear market lows and new all-time highs into three sub-zones:

• Bottom found (red): Bitcoin’s market price is trading below its underlying cost.
• Equilibrium (yellow): The market price is lower than the previous all-time high, but above the all-time low.
• Price discovery (green): The market price is above the all-time high of the previous cycle, during which Bitcoin spending from long-term investors begins to accelerate.

This Spending Binary Indicator (SBI) tracks whether the strength of a long-term investor’s Bitcoin spend, which is strong enough to reduce the total supply from them over a period of 7 days. The current situation shows that there is very little spending coming from them, which is further evidence of the fact that the market is tightly supplied.

Figure 9: BSI for long-term investors (14-day moving average)

All in all, we can combine the relative position of the SBI indicator and the spot price, as well as the underlying cost for long-term investors, to build a new tool for tracking market sentiment. We considered four subcategories to identify changes in the divestment behavior of these long-term investors:

• Capitulation: The spot price of Bitcoin is lower than the underlying cost for long-term investors, so any large payouts may be due to investors being forced to financially stress or being forced to surrender to a falling market (conditions: MVRV score (LTH-MVRV) of long-term investors <1 and SBI > 0.55).
• Transition: The trading price is slightly higher than the underlying cost for long-term investors, and there will be a relatively small daily payout (condition: 1.00.55).
• Equilibrium: After recovering from a prolonged bear market, the market seeks a new balance between reduced incoming demand, reduced liquidity, and declining holdings from the previous cycle. Large payouts from long-term investors at this stage are usually associated with a sudden rebound or correction in the price (condition: 1.50.55).
• Euphoria: When LTH-MVRV reaches 3.5 (consistent with the previous highs historically the market has reached), long-term investors hold an average of more than 250% of their profits. In this scenario, the market enters an euphoric phase, which incentivizes these long-term investors to spend their Bitcoin holdings at a very high and accelerating rate (conditions: LTH-MVRV>3.5 and SBI> 0.55).

Figure 10: Bitcoin payouts vs. Bitcoin profits for long-term investors

Summary

With the recent price increase, when the market leaves the all-time high reached in November 2021, the amount of Bitcoin profiting in the market supply has reached the level it was 2 years ago. However, the size of the unrealized profits in these bitcoins is still small and therefore far enough to incentivize long-term investors to take profits and spend them.