As the sideways trading trend continues in the cryptocurrency market, data shows that around 80% of all Bitcoin (BTC) holders (specifically holding the unspent amount) are currently in a state of profit, which increases the risk of a sell-off for the flagship decentralized finance (DeFi) asset in the near term.
Specifically, the percentage of Bitcoin unspent transaction outputs (UTXOs) in profit has reached 79.53%, which may suggest a heightened risk of a sell-off, according to the analysis by SimonaD, a member of the cryptocurrency analytics platform CryptoQuant, shared on August 15.
As a reminder, UTXO refers to the amount of a crypto asset that remains after every transaction conducted on a blockchain, similar to the change received after purchasing a product or service, but with the exception that it is a digital currency, not a lower value of the spent currency.
In other words, a UTXO is the transaction output created by the network to provide a non-exact change in each business deal, which provides a basis for accounting measures, much like in double-entry accounting, which includes inputs and outputs.
At the same time, a large percentage of Bitcoin UTXOs in profit suggests that there are a lot of holders currently making money on their Bitcoin investments. However, some holders may have only a few UTXOs, while others may have hundreds of them, which is why the distribution of UTXOs among holders is also important.
As the crypto analyst pointed out, when this metric reached about 87% in the past, “the level acted as resistance or as support after it broke,” further explaining what this means for Bitcoin:
“When it acted as resistance, we had a price pullback. Conversely, when it acted as support, the price kept running higher before we had a sell-off.”
In this case, if the percentage of UTXOs in profit continues to rise and reaches 87%, it is possible that the price of Bitcoin could pull back to the $20,000 level. On the other hand, if the price breaks through the 87% resistance level, it could continue to rise to $30,000 or higher.
Meanwhile, Bitcoin was at press time changing hands at the price of $29,140, which represents a decline of 0.88% in the last 24 hours, a 2.27% loss across the previous seven days, and a drop of 3.80% over the last month, as the most recent charts indicate.
All things considered, while the UTXO percentage in profit is a useful indicator, the best way to predict the price of Bitcoin is to use a variety of blockchain metrics in combination with technical analysis (TA) and fundamental analysis (FA).
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Best Crypto Exchange for Intermediate Traders and Investors
Invest in 70+ cryptocurrencies and 3,000+ other assets including stocks and precious metals.
0% commission on stocks – buy in bulk or just a fraction from as little as $10.
Copy top-performing traders in real time, automatically.
Regulated by financial authorities including FCA and FINRA.
Copyright © 2023 FINODES LLC. All rights reserved. Use of this site constitutes acceptance of our Terms of Service.
WARNING: The content on this site should not be considered investment advice. Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site.