Percent Supply in Profit
Percent Supply in Profit Indicator
The Percent Supply in Profit indicator measures the percentage of the Circulating Supply that is currently in profit. This metric compares the current market price with the price at which each unit of the circulating supply last moved on-chain. It is a valuable tool for assessing market sentiment and the financial state of participants.
Steps to Use the Percent Supply in Profit Indicator
1. Understand the Concept:
Supply in Profit: Refers to the portion of the circulating supply that was acquired at a price lower than the current market price.
Relevance: Indicates market sentiment and highlights the profitability of the broader holder base.
2. Interpret the Percent Supply in Profit Indicator:
High Percentage: Suggests most holders are in profit, often correlating with bullish sentiment or market peaks.
Low Percentage: Indicates a larger proportion of the supply is at a loss, commonly associated with bearish sentiment or market bottoms.
Threshold Levels: Specific percentages (e.g., above 90% or below 50%) can provide signals of market extremes.
3. Analyze Historical Patterns:
Bull Markets: Percent supply in profit typically remains high as prices rise and more holders achieve profitability.
Bear Markets: Lower percentages indicate extended periods of losses, often aligning with capitulation phases.
Market Transitions: Sudden shifts in supply profitability can signal turning points in market cycles.
4. Make Decisions:
During High Percentages: Monitor for potential profit-taking behavior, as extreme profitability may indicate overbought conditions.
During Low Percentages: Evaluate accumulation opportunities, especially if the market shows signs of stabilization.
Validate Market Sentiment: Use changes in supply profitability to confirm broader market trends and sentiment shifts.
Tips:
Combine with UTXO Metrics: Pair this indicator with UTXO-based metrics like Percent UTXOs in Profit for a detailed profitability analysis.
Use Historical Comparisons: Compare current profitability levels with historical data to identify recurring patterns and market signals.
Monitor Extremes: Pay attention to very high or very low percentages as they often align with market tops or bottoms.
Consider External Factors: Account for macroeconomic events and news that may influence holder profitability.
How to Use the Indicator Effectively
Gauge Market Sentiment: Use high profitability percentages to confirm bullish sentiment and low percentages to identify capitulation phases.
Identify Market Cycles: Monitor shifts in profitability to align strategies with market transitions.
Created By: This indicator is a widely recognized tool in blockchain analytics.
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