An on-chain metric of bitcoin rose to three-year highs, suggesting a potential supply shortage and low odds of a significant price drop. Although there are conflicting interpretations on this latest signal, many market watchers believe it is good for the cryptocurrency.
A figure that signals a low selling pressure for bitcoin
Bitcoin's percentage of unspent transaction output (UTXO) in profit recently surpassed 98%, the highest level since December 2017, according to data source Coin Metrics. Additionally, 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 own coins that they 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 relatively low selling pressure as there is a low risk of a capitulation. On the contrary, some Investors they may soon start taking profits if the potential earnings become too good to pass up, ”says Coin Metrics' State of Network: Issue 76 report.
The bitcoin supply begins to be perceived as scarcer
A UTXO is any amount of bitcoin that has not yet been spent by the current holder. A profit-making UTXO, or UTXO in profit, on the other hand, is that bitcoin 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 an even deeper decline. Currently, most investors earn from their investments and the risk of capitulation is almost nil.
Furthermore, the mood in the market is bullish and analysts expect the cryptocurrency to consolidate in the short term before challenging the record of $ 20.000 by 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.
Large spot buyers have already caused sell-side liquidity to dry up 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 scarcer," said Matthew Dibb, CEO of Stack Funds. As of press time, the cryptocurrency is trading close to $ 17.700.
