Bitcoin Analysis: Profit Supply Insights

Bitcoin’s supply in profit has declined from 99% to 76%, indicating a significant number of BTC holders are now facing unrealized losses.
Will this profit-taking phase lead to deeper declines, or is this a healthy consolidation before the next move?

As discussed by AMBCrypto, Bitcoin (BTC) encountered substantial resistance at $97K, resulting in a steep rejection. The subsequent fall to $82K at press time suggests another wave of profit-taking.

Despite the recent pullback, 76.08% of BTC’s supply remains in profit — the lowest in six months — showing that most holders are still in the green. However, this also means that about 23% of the circulating supply is now experiencing unrealized losses, totaling approximately 4.56 million BTC. As more Bitcoin holders fall into unrealized loss, some may consider selling to minimize their losses.

To counteract this sell-side liquidity, monitoring volume indicators is crucial. Although trading volume has surged by 178.22% to $43.12 billion, net deposits on exchanges have increased by only 3.96%, indicating that sell-offs are surpassing buying activity across major exchanges. With buying pressure from U.S. investors remaining low amid economic uncertainty, this suggests retail buyers are not stepping up to manage the selling pressure.

This situation may imply the involvement of third-party participants, possibly institutions, steering the market’s next direction.

High-Leverage Risk in Bitcoin Derivative Trade

Against a backdrop of weak spot buying, Bitcoin’s Estimated Leverage Ratio (ELR) — which had recently dropped to a three-month low — has experienced a substantial uptick. This indicates that derivatives traders are not reducing their leverage but instead are taking on higher-risk positions.

On March 9th, Bitcoin faced a 6.41% drop to $80K, leading to $195.86 million in liquidated long positions. Institutional “dip-buying” is becoming more prevalent, potentially paving the way for a short squeeze, which might allow Bitcoin to revisit the $85K resistance zone in the upcoming days. However, breaking through this resistance will be challenging, and additional sell-offs could result in pushing Bitcoin below $80K once more.

In summary, institutional ventures are soaking up sell-side liquidity from traders breaking even after Bitcoin’s 17% weekly decline. Yet, the risks tied to “dip-buying” remain significant.