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It’s difficult to be “too afraid of Bitcoin’s price action,” says the analyst. Here’s Why – TradingView News
Bitcoin has been having a rough time recently, but this analyst isn’t too worried about it based on the recent trend of an on-chain indicator.
Bitcoin Unrealized Loss Has Reached Lows Recently
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The “Unrealized Loss” here refers to an on-chain indicator that monitors the total loss that Bitcoin network addresses are currently holding.
This metric works by analyzing the transaction history of each coin in circulation to see what price it last moved at. Assuming this last transaction was the last point at which the currency changed hands, the price at that time would reflect its current cost basis.
If this cost basis is higher than the current cryptocurrency spot price for any coin, then that specific coin may be considered to have a currently unrealized net loss.
Unrealized Loss subtracts the two values to calculate the magnitude of loss for each coin and then adds them together. Naturally, coins of the opposite type contribute to the “Unrealized Profit” metric.
In the context of the current discussion, Unrealized Loss itself is not of interest, but rather a normalized form called Relative Unrealized Loss. This metric divides the unrealized loss by the market value of the asset.
Below is a chart showing the trend of this Bitcoin indicator over the last decade.
NewsBTC
As visible from the chart, Bitcoin’s relative unrealized loss peaked during the November 2021 bear market lows and has since fallen. Recently, the value of the metric has been close to zero, implying that market losses were only equal to an insignificant percentage of the market value.
The reason behind these lows is the recent price increase towards the new all-time high (ATH). The entire supply becomes profitable during the ATH intervals, so the unrealized loss decreases to zero.
Naturally, the indicator also fell to zero at the beginning of the year when the ATH occurred, but the bearish price action since then has meant that some of the investors have returned to losses.
Interestingly, however, the value of the indicator has still been extremely low, implying that, although there have been some purchases at higher prices, they have not been excessive.
From the chart, it is visible that the spikes followed past bull market tops on the indicator, as just a small dip was enough to put all the laggards chasing the hype at a loss. That hasn’t been the case in the current cycle so far.
“It’s hard for me to be too afraid of Bitcoin’s price action when the unrealized losses are like this,” notes Checkmate. The analyst also warns that the situation could get worse from here, but it hasn’t happened yet.
BTC Price
Bitcoin continued its recent bearish momentum during the previous day as its price fell to $64,500.