According to Glassnode data, Bitcoin is currently in a period of transition from a historical bear market to a bull market.
Bitcoin’s price-to-earnings ratio has recently fallen below 0.75
According to Glassnode’s latest report, the BTC correlation between price and supply will see several drops below 0.75 during the transition period.
“Supply in Profit” is an indicator that measures the percentage of the total Bitcoin supply that currently holds a certain profit.
The benchmark works by looking at the history of each coin chain to determine what value it was last taken at. If this past selling price is lower than the current BTC price for any coin, then that particular coin currently has some unrealized profits.
The correlation between the crypto price and the profit supply tells us whether the two parameters are moving in the same direction or not.
Now, here is a chart showing the trend of Bitcoin in crypto history:
The value of the metric has been low multiple times in recent days | Source: Glassnode's Market Pulse
When the relationship is positive, it means that the price and the supply in profit both move in the same direction. On the other hand, negative values indicate going in the opposite direction.
As you can see in the graph above, Bitcoin has had values above 0.9 for several periods in previous price cycles.
However, during transitions between bull markets and bear markets (and vice versa), the indicator often sees multiple drops below 0.75.
According to the report, these differences occur in bear-to-bull transitions because at the end of a bear market phase, sellers are exhausted, and the rest of the investors are willing to withdraw their money from the disappointment, thus reducing the correlation between price and supply at a profit. .
And during the reverse transitions, the supply in profit generally decreases by almost 100% (when the price rises to a new ATH) in relation to the price.
Recently, the indicator has seen several drops below the 0.75 threshold, which suggests that Bitcoin is currently in the historical bear to bull transition zone.
At the time of writing, Bitcoin’s price is hovering around $19.1k, down 4% over the past seven days. In the last month, the price of crypto lost 10%.
The chart below shows the trend of the BTC price over the last five days.
Looks like the value of the crypto hasn't shown much movement in the past few days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com