On Thursday, 27th August, Bitcoin [BTC] registered gains of 1.55%, with the same pushing its price from $79,023 to $80,249. This move resulted in $68.95 million in short liquidations, as opposed to just $32.65 million in long liquidations.
Since 17th August, every trading day for BTC Spot ETFs has witnessed net inflows. This streak was broken on Thursday, with a reported $35.3 million in outflows for the day, according to Farside Investors.
Despite the ETF inflow’s broken streak, August has been remarkably bullish for crypto. And yet, September is traditionally the most bearish month for Bitcoin.
Worth pointing out, however, that the profit-taking sell pressure has been tapering off, with greedy sentiment continuing to dominate too.
A transition to a bull market is here
The ratio of Bitcoin supply in profit versus supply in loss has shifted dramatically over the past ten days. Historically, towards the end of bear markets, the percentage of supply in profit/loss tends to crisscross, according to analyst Crypto Dan.
The aforementioned chart revealed how the metrics have crisscrossed in recent weeks, similar to how they behaved towards the end of the previous bear market.
The divergence between profit/loss has historically been the signal that highlights the start of a bull market. It has come to pass once again. If the trend is sustained, it would maintain the traditional 4-year market cycle.
Bitcoin trend reversal needs to be proven sustainable
The 90-day moving average of the Bitcoin realized profit/loss metric was at 1.003. Values above 1 mean that profit realization is dominant. The metric had been below 1 for most of August, but it made a turnaround following the recent rally.
This signified that over a 3-month period, realized profits exceeded realized losses. This might not be a strong shift into a bullish regime, but it is a good start that needs to be sustained.
The net unrealized loss metric shows unrealized losses as a share of market capitalization. Higher readings indicate greater stress on holders. It hit a local high of 25.2% in late June, and fell to 18.57% by 16th August.
It has fallen further still in recent days, with the same down to 7.35% at press time. Market stress is not close to capitulation levels anymore.
Crypto analyst Axel Adler Jr used this data to conclude that the Bitcoin’s price recovery has removed most of the financial stress on holders built up over the summer. Now, all that remains is for realized profits to keep growing and unrealized losses to fall. That would signal the build-up of a bullish regime.
Final Summary
- Supply in profit/loss has been crisscrossing for weeks, but the recent rally saw a strong divergence.
- Price gains need to be sustained without a major sell-off to confirm a bullish regime shift.
