- Bitcoin, Ethereum, and XRP have been trading in a “high-risk zone.”
- The “Percent of Total Supply in Profit” metric has suggested a potential upcoming market shift.
- The data hasn’t prophesied a crash, but the red flags are unmissable.
The three biggest cryptocurrencies – Bitcoin, Ethereum, and XRP – are currently flashing warning signs, according to data from on-chain analytics firm Santiment. The indicator raising eyebrows is the “Percent of Total Supply in Profit,” which tracks the percentage of a cryptocurrency’s circulating supply currently sitting in profit.
On-Chain Data Suggests Caution
With all three major coins exceeding their historical averages in this metric, concerns are mounting that a mass selloff could be on the horizon. Investors often take profits when their holdings are in the green, and with a large portion of the supply currently profitable, the temptation to sell may become irresistible.
Historically, Bitcoin, Ethereum, and XRP have averaged between 55% and 75% of their supply in profit. All three sit above this range, firmly within what Santiment defines as the “high-risk zone.”
💰 #Bitcoin (83%), #Ethereum (84%), and #XRPLedger (81%) have their respective supplies in historically high risk profit levels compared to their averages that hover in the 55%-75% range dating back to 2018. #Crypto can absolutely still climb due to more exposure from pic.twitter.com/ADmMcl5zhO
— Santiment (@santimentfeed) January 18, 2024
While external factors like increased exposure from ETFs could still push prices higher in the short term, Santiment emphasizes that a drop below 75% supply in profit would be a “great signal,” indicating continued long-term growth.
Currently, 84% of Ethereum’s supply and 83% of Bitcoin’s are in the green, with XRP trailing slightly behind at 81%. Historically, these figures have often preceded significant selloffs, as investors holding profitable positions become more likely to cash out.
While this data doesn’t guarantee an imminent crash, it does raise a red flag for investors. With a large portion of each asset’s supply already in profit, the potential for a mass selloff is heightened. This is especially true if broader market conditions turn sour or negative news specific to any of the three cryptocurrencies emerges.
On the Flipside
- They posit that, as facilitated by ETFs, institutional interest might steer prices upward despite the elevated profit percentages.
- Not every instance of high-profit percentages has resulted in significant selloffs as the crypto market is influenced by multifaceted factors, making it challenging to predict a uniform outcome based on this metric.
Why This Matters
The current high levels of “Percent of Total Supply in Profit” suggest a heightened risk of price corrections for Bitcoin, Ethereum, and XRP. While not a definitive prediction of a downturn, this metric is a valuable indicator for investors to watch as they navigate the ever-volatile world of cryptocurrencies.
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