Challenging to Become “Overly Concerned About Bitcoin Price Movement,” Analyst Reassures. Here’s the Reason.
Bitcoin has recently experienced a period of struggle, but an analyst remains unfazed by the situation, drawing attention to a promising trend in an on-chain indicator.
Bitcoin’s Unrealized Loss Indicates Encouraging Signs
Addressing this matter in a recent article on X, on-chain analyst Checkmate explored the significance of the cryptocurrency’s latest price action and its relationship with the Unrealized Loss indicator.
The term “Unrealized Loss” refers to an on-chain metric that tracks the total loss held by Bitcoin addresses at any given time.
This metric operates by examining the transaction history of each Bitcoin in circulation to determine the price at which it was last moved. Assuming that this most recent transaction represents the most recent change in ownership, the price at that time can be considered as its current cost basis.
If this cost basis exceeds the current spot price of the cryptocurrency for any given coin, that particular coin is considered to possess a net unrealized loss.
By subtracting the spot price from the cost basis, the Unrealized Loss calculates the extent of loss for each coin and aggregates them. Conversely, coins with opposite characteristics contribute to the “Unrealized Profit” metric.
In the context of the present discourse, the Unrealized Loss itself holds lesser importance compared to a normalized version called the Relative Unrealized Loss. This metric divides the Unrealized Loss by the asset’s market capitalization.
The chart below illustrates the historical trend of this Bitcoin indicator over approximately the past decade.
As observed in the graph, the Bitcoin Relative Unrealized Loss peaked during the lows of the bear market in November 2022 and has since been on a downward trajectory. Recently, the metric has hovered around zero, signifying that the losses in the market have only accounted for a negligible percentage of the overall market cap.
This decline can be attributed to the recent surge in prices, which propelled Bitcoin to reach new all-time highs. During these ATH breakthroughs, the entire supply becomes profitable, leading to the Unrealized Loss diminishing to zero.
Earlier this year, when the ATH was achieved, the indicator similarly fell to zero. However, the subsequent bearish price action resulted in some investors incurring losses.
Interestingly, despite the decline, the indicator has persisted at remarkably low levels, indicating that while there has been some buying at higher prices, it has not been excessive.
From the chart, it is evident that spikes following bull market peaks in the past have influenced the indicator, as even a slight drop was sufficient to cause significant losses for those who joined late in pursuit of hype. However, this has not been the case in the current cycle thus far.
“I find it challenging to become overly concerned about Bitcoin price action when the unrealized losses appear like this,” commented Checkmate. The analyst also cautioned that the situation could worsen, but such a scenario has not yet materialized.
BTC Price
Over the past day, Bitcoin has continued its recent downward trend, with the price slipping to $64,500.