CryptoQuant says bitcoin’s 'supply in profit' level signals potential for further gains

Bitcoin BTC +0.39% 's price has risen nearly 8% following the U.S. Federal Reserve's 50 basis-point rate cut, influencing a key market indicator that suggests potential for further gains, according to an analyst at research firm CryptoQuant.

That indicator, the "supply in profit" metric, refers to the percentage of bitcoin's circulating supply that was purchased at a price lower than the current market value. When this percentage rises, it means a greater portion of bitcoin holders are in profit, which can lead to reduced selling pressure and increased market confidence.

CryptoQuant’s Head of Research Julio Moreno told The Block that bitcoin's recent uptick has pushed the supply in profit metric above its 365-day moving average. "This inflection point is generally associated with further price gains," Moreno said, suggesting that bitcoin could see additional upward momentum.

The supply in profit metric has crossed over its 365-day moving average, which is generally associated with further price gains. Image: CryptoQuant.

Bitcoin price has surpassed a key psychological inflection point

According to a CryptoQuant blog post, the supply in profit level often acts as an emotional benchmark for investors, serving as a crucial support or resistance zone. "When the price exceeds this level, optimism tends to rise; if it falls below, selling pressure may increase," the post noted.

Bitfinex analysts, however, have urged caution. They observed that while bitcoin’s uptick was initially driven by spot market buying, this activity has since slowed, as indicated by the flattening of the spot cumulative volume delta (CVD). The CVD is a metric that measures the difference between the cumulative buying and selling volume in the spot market over a specific period. It essentially tracks whether buying or selling pressure is dominating in the market. 

"We expect bitcoin to consolidate in a new range near current levels or experience a partial correction in the short term," they said in a recent report.

Bitcoin traded around $63,516 at publication time, according to The Block's bitcoin price data .