As a seasoned researcher with years of experience in the cryptocurrency market, I find myself constantly intrigued by on-chain indicators and their implications for the future price movements of Bitcoin. The Average Profitability Index (API) has been a fascinating metric to observe over the past decade, providing valuable insights into the profitability of Bitcoin holders as a whole.
Currently, on-chain data indicates that the Bitcoin Profitability Ratio stands at a staggering 202%. Let’s take a look at how this stacks up against previous bullish phases for this digital asset.
Bitcoin Average Profitability Index Has Been Rising Recently
In a recent article for X, CryptoQuant’s Axel Adler Jr. delved into the current movement in the Average Profit Margin Index of Bitcoin. The “Average Profit Margin Index” is an on-chain metric that sheds light on whether the current market price exceeds or falls short of the actual price at which it was realized.
In this context, “realized price” refers to the average cost at which an ordinary Bitcoin investor or user has acquired their Bitcoins. The “Average Profitability Index” is a percentage value that compares the current market price (spot price) with the average cost basis. A value of 100% implies that the spot price equals the realized price, suggesting no profit or loss for the average investor.
If the value of this indicator surpasses 100%, it signifies that the asset is currently being traded above the average investor’s cost basis. This could imply that the market, in general, is experiencing profits. Conversely, if the value falls below this threshold, it indicates that investors as a whole are holding their assets at an overall unrealized loss.
Currently, let me share a graph illustrating the evolution of the Bitcoin Average Profitability Index over the last ten years.
According to the graph, the Bitcoin Average Profitability Index surpassed 100% over the past year, indicating that most investors have been raking in profits.
Earlier this year, the indicator reached unusually high levels as the market surge towards its new record high took place. More recently, with the latest uptrend in the coin’s performance, the indicator has been increasing again, but it is still quite a distance from the level achieved during that record-breaking high.
Currently, the Bitcoin Average Profitability Index hovers near 202%, meaning the current market price is roughly twice the average price at which bitcoins have been sold. In the past, when this indicator has reached such high levels, it has often signaled peaks in the asset’s value.
As the size of the investor’s earnings grows, so does their urge to cash out on their profits becomes stronger. According to the analyst, when the index surpasses a 300% increase, it is expected that investors will engage in more active profit-taking.
The graph indicates that the Bitcoin Average Profitability Index exceeded 300% on just two occasions, which coincided with the peaks of the 2017 and 2021 market surges.
Following this historical trend, it seems that Bitcoin’s ongoing bull run might continue until the indicator surpasses the 300% threshold.
BTC Price
At the time of writing, Bitcoin is trading at around $67,400, up 1% over the last seven days.
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2024-10-23 16:16