59% of Bitcoin holders sit on profits

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59% of Bitcoin holders are profitable because the coins are trading above the current realized price, which is the cost base of the average BTC holder, according to IntoTheblock data from January 19.

On-chain parallel flows show that the realized price of Bitcoin is around $19,700. Comparing this number with the spot price of BTC currently at over $20,700, this means that 59% of coin holders are sitting on profits, a net positive for the ecosystem.

This development is a boost for HODLers, given the sharp contraction in prices over the past few months. Then BTC plunged from around $69,000 in November 2021 to just over $15,000 in 2022.

Bitcoin Price Chart | Source: BTCUSDT on TradingView.com

On-chain data is analyzed in real time and analysts interpret it to assess the state of the market. Their interpretation, in turn, could massively influence sentiment and determine how retail traders act based on price action.

Related Reading: Bitcoin Price: Investors Predict a 12% Drop for BTC in the Next Two Weeks

As BTC prices react from $21,600 posted earlier this week, on-chain stats show more than half of BTC holders are green. Only 38% of market players are out of the money.

Bitcoin holders in the money: Source: IntoTheblock Most Bitcoin holders have been in the red

Even though BTC appears to be recovering, there needs to be a full breakout to solidify and revive demand. Based on recent Bitcoin price action, most holders appear to be in the green after a long stretch of losses.

Bitcoin Realized Price: Source: Cryptoquant.com

Trackers show that holders have been losing ground since mid-August 2022. The situation only got worse over the following months as fear, uncertainty and doubt (FUD) swept the markets from crypto and BTC, forcing the coin even lower. This pullback was due to the unexpected collapse of FTX, a cryptocurrency exchange, and Alameda Research, a trading company closely associated with the Sam Bankman-Fried exchange.

By early November, BTC had fallen over 65% from 2021 highs, underscoring the level of apprehension across the board, pushing the realized price even lower.

Realized price vs. market price

The realized price is a metric that measures the price of all BTC currently available at the rate at which it was purchased. The resulting value is then divided by the BTC in the circulating supply.

The result gives an “average cost base” which is then used to describe the realized price. It is different from the spot market price because the latter shows the current price of Bitcoin based on real-time supply and demand. Like any other asset, BTC prices are overwhelmingly determined by market forces, with the “hype” element, describing sentiment, another factor to consider.

Related Reading: Overbought or Ready to Rip? Bitcoin Daily RSI Reaches Explosive Levels

That more than half of Bitcoin holders are profitable at spot rates is significant. The realized price helps to judge the overall economic situation of the Bitcoin market. How this metric fluctuates against the market price indicates whether BTC holders are buoyant or struggling. In technical analysis, the realized price can be used to mark resistance or support levels.

Technically, whenever the realized price exceeds the market price, it indicates that some BTC holder is in profit. If it falls below the market price, then overall a section of market players is red. The profitability depends on the price level they bought.

Featured image from Flickr, Charts from TradingView.com

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