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An on-chain bitcoin metric rose to three-year highs, suggesting a potential supply shortage and low odds of a significant price pullback. Although there are conflicting interpretations on this latest signal, many market watchers believe it is good for the cryptocurrency.
The percentage of unspent bitcoin outgoing transactions (UTXOs) in profit recently exceeded 98%, the highest level since December 2017, according to data source Coin Metrics. Furthermore, the number of UTXOs in profit reached a record high of over 110 million.
The data indicates that a large number of holders are currently making money with their coins and may decide to hold or liquidate, depending on their prospects. Their next step could influence the price trajectory.
“A high percentage of UTXO in profit potentially signals that there is relatively low selling pressure as there is a low risk of capitulation. Conversely, it could signal that some investors may soon start taking profits if the potential earnings become too good to pass up, “according to Coin Metrics’ State of Network: Issue 76.
A UTXO is bitcoins remaining after a transaction similar to receiving change after making a large cash payment. These coins can be spent as an input for future transactions. A profit-making UTXO is one whose price at the time of creation is lower than the current market price.
Capitulation is where investors give up trying to regain lost gains and sell in the falling market, leading to a deeper decline. Currently, most investors make money from their investments and the risk of capitulation is almost nil. Furthermore, the market is optimistic and holders are unlikely to see profits anytime soon.
Analysts expect the cryptocurrency to consolidate in the short term before challenging the $ 20,000 record before the end of the year.
“Most investors who have held steady for so long would continue to hold up to new all-time highs, causing a supply shortage and acting as a positive reinforcing ring, driving prices higher,” Connor Abendschein said. , research analyst at Digital Assets Data CoinDesk in an email.
Large spot buyers have already caused sell-side liquidity to run out and the situation could intensify as UTXO’s percentage of profit increases.
“Between the GBTC confidence of Grayscale, MicroStrategy and the influx of other large spot buyers, bitcoin supply is starting to look scarce,” Matthew Dibb, CEO of Stack Funds, told CoinDesk. Grayscale is owned by CoinDesk’s parent company, Digital Currency Group.
As of press time, the cryptocurrency is trading close to $ 15,800, having reached a three-year high of $ 16,157 early Thursday.
