According to Glassnode data, Bitcoin is currently in a historic “bear-to-bull” phase, a transition from a bear market to a bull market.
A recent report from Glassnode shows that the correlation between Bitcoin’s price and “supply in profit” (which represents the absolute amount of Bitcoin currently in profit in a given network) often drops below 0.75 several times during the transition period.
The so-called “supply in profit” is to measure the percentage ratio of the overall bitcoin supply that still has profit.
This metric uses a look at the on-chain history of each bitcoin to see the price at the last move. If the previous sale price is lower than the current bitcoin value, then the bitcoin has an unrealized profit at the moment.
The correlation between Bitcoin price and supply in profit shows whether these two indicators are headed in the same direction. The chart below shows how Bitcoin’s aforementioned correlation has trended in its price history.
When the correlation is positive, it means that the price and the supply in profit are moving in the same direction; a negative correlation means that the two are moving in the opposite direction.
As you can see in the chart above, Bitcoin has had this correlation above 0.9 for most of each of its past price cycles.
However, during the transition period from a bull market to a bear market, or from a bear market to a bull market, the indicator fell below 0.75 several times.
According to the report, this kind of deviation occurs when a bear market turns to a bull market, because in the late stage of the bear market, the sellers are unable to sell any more, and the remaining investors are reluctant to move funds due to setbacks, thus reducing the price and profit. correlation between supply.
During the transition from a bull market to a bear market, the supply in profit typically surges to nearly 100% as prices soar to new highs, thus reducing the correlation between supply in profit and price.
Recently, this indicator has repeatedly fallen below the 0.75 threshold, indicating that Bitcoin is currently in the transition period from a bear market to a bull market.
At the time of writing, bitcoin is trading at $19,254.42, down about 1% over the past seven days and 5.1% over the past month.