Bitcoin’s Profitable Supply Exceeds 85%—Are We Entering a State of Euphoria?

Bitcoin is experiencing a gradual recovery, currently trading above the $94,000 mark. This upward movement follows a recent dip that had pushed prices down earlier this month. Despite these gains, Bitcoin is still approximately 12.7% below its peak reached in January.

Investors are keeping an eye on the critical resistance around the $100,000 psychological level, while on-chain metrics indicate notable changes in market behavior that could affect both short- and mid-term sentiment. A significant development is the increasing percentage of Bitcoin in circulation that is currently showing profits.

As the market approaches historical thresholds of excitement, some analysts suggest that, while this trend may encourage further bullish movement, it could also lead to market volatility as participants evaluate the right moment to secure their profits.

The increase in profitability is being analyzed alongside various other indicators, such as leverage and RSI behavior, which present a mix of signals to the market.

Bitcoin Supply in Profit Approaches Euphoria Levels

An analyst from CryptoQuant, Darkfost, recently shared insights regarding Bitcoin’s on-chain dynamics, focusing on the “supply in profit” metric.

Darkfost noted that the supply in profit, representing the share of Bitcoin that is currently priced higher than the original purchase price, has surged back above 85%. This figure had dipped to around 75% during the past correction but has rebounded in alignment with the recent increase in prices.

Historically, supply in profit levels exceeding 90% have coincided with euphoric periods in previous market cycles. Although this level has not yet been reached in the current cycle, the upward trend indicates it may be on the horizon.

Darkfost pointed out that such euphoria often contributes to rapid price increases, yet typically precedes short- to mid-term corrections. The analyst highlighted the significant shift in sentiment from the recent lows:

It’s important to remember that in earlier cycles, the lowest supply in profit levels were approximately 45–50%, which aligned with severe bear market phases.

In this context, keeping an eye on this metric could be crucial for predicting potential trend reversals or periods of heightened volatility.

Leverage Ratio and RSI Show Signs of Reduced Market Aggression

In another analysis, a different CryptoQuant analyst, Crypto Lion, discussed the interplay between the leverage ratio and relative strength index (RSI) indicators.

The analyst referenced a custom metric developed by CryptoQuant, which combines RSI with an open interest-to-reserve ratio to evaluate speculative market positioning.

Crypto Lion observed that while RSI swings are currently more pronounced than during the summer of 2021, the leverage dynamics suggest the market is not as overheated at present.

The analysis indicates that the market seems to be gradually decoupling from aggressive leveraging, potentially indicating a shift toward movements driven more by spot trading. The analyst concluded:

I am cautious about what might occur following the next peak, questioning whether the original indicator will show a decline, which wouldn’t be surprising.