On-chain data shows that Bitcoin investors are now holding a 121% profit on average. Here’s whether this was enough to be at the top in the past.
Bitcoin Profitability Index Currently Sitting at About 221%
In a new post on X, CryptoQuant author Axel Adler Jr discussed the recent trend in the Bitcoin Average Profitability Index. The “Average Profitability Index” is a BTC index that compares the asset’s spot value with the realized value.
“Achieved price” here refers to the average cost base or acquisition value of the average investor in the Bitcoin market. The value of this metric is determined using on-chain data, with the last price at which each coin being spent on the blockchain is taken as the basis of its current cost.
When the Average Profitability Index is more than 100%, it means that the spot price of the cryptocurrency is currently higher than the realized price. Such a trend suggests that the average investor holds the full amount of profit.
On the other hand, an indicator of being below this threshold means that the BTC market as a whole is holding the coins at a total unrealized loss. Naturally, the index equals exactly 100% indicating that the owners as a whole are breaking even on their investments.
Now, here is a chart showing the Bitcoin Average Profitability Index over the last ten years:
As seen in the graph above, the Bitcoin Average Profitability Index registered a significant increase recently as the cryptocurrency started to climb to a new high (ATH).
The index has now reached a value of 221%, which suggests that investors have a large amount of profits. In particular, BTC addresses as a whole are at a 121% profit.
In general, the higher the profits of the owners, the more likely they are to fall into the temptation of profit taking. The current level of the Average Profitability Index is high, but it is uncertain whether it is high enough for a mass selloff to be dangerous.
On the chart, the analyst marks how much the metric rose during the previous bull run. It looks like 2017 reached 460%, and 2021 395%.
So far in the current cycle, the highest it has moved was 272%, which happened at the peak back in March of this year. Given the fact that the index has yet to reach this level, not to mention the peaks from the last cycles, it is possible that Bitcoin still has enough room to work, before a top is a possibility.
BTC price
At the time of writing, Bitcoin is trading around $76,200, up more than 9% over the past week.
