key takeaways
- The net unrealized profit/loss of all bitcoin is currently 0.11 BTC, or $2,500.
- Profits have been positive since Jan 13, negative for most of the last 6 months
- Two-thirds of the bitcoin supply is in profit while the price is down almost 70% from its all-time high
whatever you think Bitcoin As an asset, the public ledger that is the blockchain is a lot of fun to do a little reading and look at the analysis behind the asset. Love it or hate it, we have access to a wealth of information through on-chain analytics that we do not have for most other assets.
Today, let’s do a quick little thing to assess the unrealized benefits of bitcoin. In simple words, what would be the profit or loss if all bitcoins were sold now? Obviously, this would tank the market, and everyone’s net worth would be screwed. But hey, don’t ruin the party. It’s still a reasonably indicative metric.
Ultimately, if bitcoin is ever to perform as a store of value, it must meet the definition of that term – that is, protect one’s wealth.
Most Bitcoiners Still Making Profits
The first step is simple. Let’s take a look at how much leverage and supply of bitcoins there are. The chart below plots this, as the total supply of bitcoin mechanically climbs through a predetermined schedule toward an eventual supply cap of 21 million coins.
The merciless effects of the bear market are clear. There is a lot of red visible on the right side of the chart with a loss of over 10 million bitcoins in November 2022. Thanks, Sam.
A small 2023 reissue has brought that number back down, with 6.6 million bitcoins currently lost.
The next chart shows this in a different way – tracking the percentage of total supply in profit.
We can see that with two-thirds of the total supply in profit, it is likely that the total unrealized profit of bitcoin is a positive number, i.e. if everyone sold at the current price, the difference between that current price and The difference that bitcoins were bought will be positive.
And that’s it. A profit of 0.114 BTC, or around $2,500 at current prices.
The profit numbers flipped positive on January 13th of this year, turning negative for the second half of 2022, as bitcoin discovered the hard way when the money printer is turned off and interest rates are no longer zero. If so, how difficult things are. ,
What does all this mean?
So what does this all mean? Nothing. like.
On-chain metrics are fun to play with, and can definitely be some pretty cool indicators. But the chart above is actually a great way to look at price. Price goes up, profits go up. Price falls, profit goes down.
Not to mention, the market is clearly following the macro news right now, essentially a leveraged bet that Fed Chairman Jerome Powell’s words will be kind.
I had a play with layering the prices on different charts, trying to find out if there was any effect. But, no.
Still, despite the lack of predictive power here, it is an interesting way to look at bitcoin’s dynamics and gauge overall market sentiment.
An increase in profit metrics is evident since the beginning of the year, even as prices remain stable down one magnitude Bull market level. Whether the market continues to bet on the Federal Reserve’s looser rates, or if inflation and employment numbers give it reason to hesitate and pull back, remains to be seen.
It’s a macro world out there, and bitcoin is just living in it. Stay tuned for more on-chain pieces, and we’ll try to improve this relationship a little bit more.