The recent drop in the percentage of Bitcoin Unspent Transaction Outputs (UTXOs) in profit to its lowest level of the year, similar to levels last seen in October 2023, has raised concerns among investors. This decline in the metric is closely associated with the current downturn in bitcoin’s price as well as the downward trend in the broader crypto market. However, according to a report by CryptoQuant analyst EgyHash, this could potentially signal the beginning of a significant rally.
Bitcoin UTXOs represent the residual amount of cryptocurrency following a transaction on the network. Analyzing UTXOs is critical in understanding investor behavior over different time frames. In June, 99% of Bitcoin UTXOs were in profit, but this figure dropped significantly to 68.5% by September. EgyHash suggests that this plunge indicates that some market participants have realized gains on their BTC investments and, in combination with ongoing selling pressure, have contributed to the decline in the value of the leading cryptocurrency.
The historical data shows that the last time UTXOs in profit experienced a comparable decrease, bitcoin’s price surged to a new all-time high, climbing 273% from $26,700 to $73,000. Therefore, a decrease in this metric suggests that there might be room for BTC to rally and potentially reach new record levels. EgyHash’s analysis is in line with predictions from on-chain experts who anticipate a second phase of the BTC bull run in the near future.
Another pseudonymous analyst from CryptoQuant, Avocado, noted a slight increase in Bitcoin UTXOs under six months. These UTXOs are believed to be from new investors who entered the market earlier in the year, likely during the peak in March when BTC hit its previous all-time high. By comparing these UTXOs to past cycles, Avocado identified a pattern similar to that of 2019, where investors holding such UTXOs either exited the market due to losses or transitioned into the group of UTXOs aged six months and above, ultimately leading to a new all-time high for bitcoin.
Aside from the decline in UTXOs in profit, bitcoin’s price has remained relatively stagnant for an extended period. Avocado attributes this lack of movement to reduced price volatility caused by a rise in over-the-counter trading in comparison to exchange-based trading. While maintaining a positive outlook on the long-term upward trajectory of bitcoin, Avocado advises caution in the short term and recommends closely monitoring the market for any potential developments.
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