January’s bullish price action has put the average BTC holder in a regime of unrealized profit.
After a volatile January, which saw Bitcoin (BTC) and the associated cryptos spring back to life from the deep freeze of 2022, most of these digital assets have been consolidating. This is pretty normal for an asset class after a strong bull run. And despite the premier digital asset trading around the weekly low of $22.6k, at the time of publishing, the average BTC holder is now holding an unrealized profit.
According to data from Glassnode, several macro scale on-chain indicators suggest the turning of the market tides is potentially underway. Looking at the chart above, which highlights the ratio between Realized Profits and Losses, we can identify structural changes in dominance between the two. Following the recent peak of Nov. 2021 and the subsequent collapse in price action, a loss-dominated regime ensued.
However, the chart goes all the way back to Mar-Apr. 2020 — to the onset of the pandemic. After an initial collapse in the market sentiment, we saw (mostly) exuberance in the BTC profit regime — one which lasted till the end of 2021. After an initial period of liquidity crunch in 2022, the losses started to mount post the LUNA collapse. These losses magnified further in the wake of FTX's bankruptcy.
As the crypto market capitulated, the Realized P/L Ratio was pushed below 1, with increasing severity with each subsequent capitulation in price action. Nevertheless, we are now seeing a silver lining — the first sustained period of profitability since the Apr 2022 exit liquidity event, suggesting initial signs of a change in the profitability regime.
Originally Published on Medium
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