Bitcoin Loss Taking Spikes, Why This Could Be Bullish
April 07 2023 - 9:00AM
NEWSBTC
On-chain data shows Bitcoin loss-taking transaction volume has
spiked recently. Here’s why this could turn out to be bullish for
the asset’s price. Bitcoin Loss-Taking Volume Has Been More Than
The Profit-Taking One Recently According to data from the on-chain
analytics firm Santiment, traders are currently taking losses at
twice the rate of profits. The relevant indicator here is the
“ratio of daily transaction volume in profit to loss,” which, as
its name already suggests, tells us about how the per day Bitcoin
profit-taking volume compares with the loss-taking one. Something
to note is that this metric only measures profits and losses that
have been realized (“taken”). This only happens when an investor
moves or sells their coins at a price different than what they
bought them at. Coins that are carrying some profit or loss, but
are yet to be sold, are said to be holding an “unrealized
profit/loss.” Related Reading: Woes For Bitcoin And Ethereum As
Price Weakens, Which Direction Will Prevail? When the value of this
metric is positive, it means the profit-taking volumes are
currently overwhelming the loss-taking ones. Such a trend suggests
that the investors as a whole are realizing some profit with their
selling right now. On the other hand, a negative value implies that
losses are dominating the market currently, and hence, a majority
of the holders are participating in loss realization. Now, here is
a chart that shows the trend in the ratio of daily transaction
volume in profit to loss for Bitcoin, as well as for Ethereum, over
the last few months: Looks like the value of the metric has plunged
in recent days | Source: Santiment on Twitter As displayed in the
above graph, the ratio of transaction volume in profit to loss had
been highly positive for both Bitcoin and Ethereum just a while
back when the prices had been surging. This spike in profit-taking
made sense as investors generally like to harvest some gains when
the price observes rapid growth. Following this profit selling,
however, the rally came to a halt and the cryptocurrencies have
been mostly consolidating since then. Recently, the indicator’s
value has plunged for both Bitcoin and Ethereum and for the first
time in five weeks, it has turned red. This implies that the
holders are now participating in mass loss-taking. The plummet has
been sharper for BTC, with the metric’s value falling to about
-0.45. This value suggests that loss realization is currently
happening at a rate almost double that of the profits. Related
Reading: Bitcoin Older Than 5 Years Abruptly Moves, Bearish Sign?
Santiment notes that this trend could actually be a good sign for
the asset as it shows the FOMOers who bought at high prices have
started to give up on the rally. The coins that these holders are
selling may end up in the hands of investors with a stronger
conviction, hence providing a more solid bullish foundation. BTC
Price At the time of writing, Bitcoin is trading around $27,900, up
1% in the last week. BTC has continued to consolidate recently |
Source: BTCUSD on TradingView Featured image from Traxer on
Unsplash.com, charts from TradingView.com, Santiment.net
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