What Ways Profit & Loss Supply Metrics Could Help In Predicting The Bitcoin Price Rallies?

Recently, on the 10th of November, the world’s largest cryptocurrency, Bitcoin, hits the level of 69000 dollars, which is an all-time high, according to the report of the bitstamp exchange rate.

There is no denying that it is indeed a fantastic thing that bitcoin can reach this much high value and increase its entire market capitalization to the mark of 3 trillion dollars. But if we see the performance of this digital currency in June and July 2021, then it was not so good.

Bitcoin is a highly volatile digital currency, and we all are aware of that fact. At that time, bitcoin was very weak, and people even started to think that this digital currency would decline and reach the shallow level of 16000 dollars.

In addition, some developments made the investors anxious about whether they should invest in this crypto. Some of these developments were the Chinese government’s claims, bitcoin getting more attention from the US officials, increasing rate of retail investors continuing the panic selling of this crypto, and many more.

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However, the one essential thing which the world’s biggest cryptocurrency, bitcoin, has taught us is that when it comes to predicting the prices of this digital currency, then it is challenging.

So now you may be thinking about how can we learn more about changing the price of bitcoin or this market to predict the correct prices?

Well, for your information, there are so many fantastic trading strategies available on the internet from which you can gain a lot of knowledge. But in this article, we will discuss analyzing or predicting the bitcoin price by using the on-chain supply metrics.

You need to know that the supply metrics have worked very well in the current rally. It will also continue generating valuable signals for the investors, which can be very helpful for price prediction.

It is good to know the term’s meaning before moving on to the two approaches that help analyze bitcoin. The first one is the bitcoin supply percentage in profit. Well, it is the percentage of the prevailing bitcoins whose value was lesser than the current price of bitcoin at the time of their last movement. Generally, when a good percentage of the entire supply of bitcoin seems to be profitable, it indicates that the bitcoin market is undergoing a bullish cycle.

The second one is the percentage of the bitcoin supply at the time of loss. You need to know that this percentage shows the quantity of the bitcoin in the network, which is presently in the loss. In other words, when their last movement happened then, their prices were more than their present value in the market.

Therefore, we can see that this metric can help highlight the market’s bottoms, which will let you know when the investors might get ready to make their entry again into the market.

How to analyze bitcoin supply in profit or loss based on technical trend lines?

For this method, you have to take the net percentage of the bitcoin supply in the loss and profit metrics. After that, you can do the additional setting by forming the 21-day moving average to evade the effect of display sawtooth. It will also help you analyze more conveniently.

You need to know that everyone can make comparable data set in the blockchain data provider’s account, like glass node. After that, you have to use the technical analysis method too precisely in the trend lines. By using trend lines, you can get accurate signals.

For example, you should know that when the excellent supply is consistent and in the range of 90% to 99%, it signifies that the bitcoin tends to jump on the parabolic development.

Moreover, when the profitable supply curves break down the trend lines, bitcoin has reached its potential growth and will now decline. When it comes to interpreting the bitcoin supply in loss, one can see the level of loss when it is 50 percent.

So now you can see that the use of this method is very much useful for the price prediction of bitcoin.

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