Bitcoin [BTC]: As the market enters the ‘transition phase’, here are the things to watch out for

  • On-chain data revealed that BTC’s continued performance indicates an approaching end to the bear market
  • While many BTC holders continue to make a profit, the level of profitability is starting to drop

In its latest report, on-chain analytics company Glasnode analyzed Bitcoins [BTC] chain performance. In doing so, it found that prevailing price movements resemble previous bear market bottoms.

According to the data provider, last week’s price drop to a low of $22,199 occurred alongside key price levels. These are related to older holders from the previous cycle and whale entities that have been active since the 2018 cycle, making it very important.

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Bigger profit, import of new money and all good

Glassnode reviewed BTC’s Net Unrealized Profit/Loss metric (NUPL) and noted that “the current state of the market can reasonably be described as transitional,” which is common “in the later stages of a bear market.”

The NUPL metric determines whether BTC holders are currently experiencing unrealized gains or losses. It compares the average purchase price of all BTCs held by investors with the current market price. If the market price is higher, there is a net unrealized gain, while if the market price is lower, there is a net unrealized loss.

According to Glassnode, the weekly average of NUPL has moved from a state of net unrealized loss to a positive state since mid-January. This is a sign that the typical BTC holder now has a net unrealized gain of about 15% of the market cap, which resembles transitional phases in previous bear markets.

Nevertheless, Glassnode warned that the modified version of NUPL, which takes lost coins into account, showed that the market is only slightly below the break-even point. Simply put, this can still be considered to be in bear market territory.

Source: Glassnode

Aside from the NUPL metric, another indication of the “transition phase” is the introduction of new money to the market.

Glassnode considered BTC’s transfer volume metrics and found that the coin’s monthly transfer volume has increased 79% since the beginning of January to $9.5 billion per day. The report even described this as a positive sign of growth.

Read Bitcoin [BTC] Price Forecast 2023-24

However, it added a caveat that this is still well below the annual average, which has been heavily impacted by a significant number of FTX/Alameda-related wash volumes. Nevertheless, it remains a good indicator that the end of the bear market may be approaching.

Source: Glassnode

In addition, BTC’s Adjusted Spent Output Profit Ratio (aSOPR) revealed the “first sustained burst of profit-taking since March 2022”. However, Glassnode warned that the coin’s realized profit/loss ratio revealed that its profitability has “shifted back into a transitional phase”.

This means that BTC may not be as profitable as it was in January when the price boomed. Therefore caution is advised.

Source: Glassnode

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