Data from Glassnode indicates that Bitcoin is currently in a historical bear market to a bull market transition period.
Bitcoin Price and Supply Correlation in Profit Recently Below 0.75
According to a recent report from glassHowever, the correlation between BTC price and supply in profit generally notes multiple dips below 0.75 during transitional periods.
The “Offer in profit“It is an indicator that measures the percentage of the total Bitcoin supply that is holding some profit at the moment.
The scale works by looking at the chain history of each coin to see what price it was last quoted at. If the previous sale price was less than the current BTC value of any coin, then that particular coin has some unrealized profit at the moment.
The correlation between the price of a cryptocurrency and its bid in profit tells us whether the two metrics are moving in the same direction or not.
Now, here is a chart showing the trend in this bitcoin correlation over the history of the cryptocurrency:
The value of the metric has been low multiple times in recent days | Source: Glassnode's Market Pulse
When the correlation is positive, it means that the price and bid in profit are moving in the same direction. On the other hand, negative values indicate that they are going in opposite directions.
As you can see in the chart above, Bitcoin has historically been above 0.9 for the majority of the time during each of the previous price cycles.
However, during transition periods between bull markets and bear markets (as well as vice versa), the indicator usually notes multiple declines below 0.75.
According to the report, these deviations occur in case of bears transitions to bullishness because in the late bear market stages, sellers turn exhausted while the remaining investors are reluctant to move their money out of frustration, thus reducing the correlation between price and supply in profit.
During opposite transitions, the bid in profit generally rises to close to 100% (as the price rises to a new ATH), reducing any correlation to the price.
Recently, the index noticed several drops below the 0.75 threshold, which indicates that Bitcoin is currently in a bullish transition zone.
At the time of writing this report, Bitcoin price It is floating around $19.1K, down 4% in the past seven days. Over the past month, the cryptocurrency has lost 10% of its value.
The chart below shows the trend in BTC price over the past five days.
Looks like the value of the crypto hasn't shown much movement in the past few days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com