If all Bitcoin was sold today, the profit would be $2,500: An on-chain analysis
- The net unrealised profit/loss of all Bitcoins is currently 0.11 BTC, or $2,500
- The profit has been positive since January 13th, having been negative for most of the prior 6 months
- Two-thirds of the Bitcoin supply is in profit, despite prices remaining nearly 70% off all-time highs
Whatever you think of Bitcoin as an asset, the public ledger that is the blockchain makes it a lot of fun to get a bit nerdy and look into the analytics behind the asset. Love it or hate it, we have a wealth of information via on-chain analytics that we simply don’t have for most other assets.
Today, let’s do a quick little piece assessing Bitcoin’s unrealised profit. In simple terms, what would the profit or loss be if all Bitcoins were sold right now? Obviously, this would tank the market, and everybody’s net worth would go poof. But hey, don’t ruin the party. It’s still a reasonably indicative metric.
After all, if Bitcoin is ever to perform as a store-of-value, it has to satisfy the definition of that term – that is, protect one’s wealth.
Majority of Bitcoin is still profit-making
First step is simple. Let’s look at how much of the Bitcoin supply is profit and supply. The below chart plots this, as the total supply of Bitcoin climbs mechanically via its pre-determined schedule towards its final supply cap of 21 million coins.
The merciless effects of the bear market are clear to see. That’s a whole lot of red appearing on the right side of the chart, with over 10 million bitcoins in loss in November 2022. Thanks, Sam.
The little renaissance that 2023 is has kicked that number back down, with 6.6 million bitcoins currently at a loss.
The next chart shows this in a different way – tracking the percentage of the total supply in profit.
We can see that with two-thirds of the total supply in profit, it is likely that Bitcoin’s total unrealised profit is a positive number, i..e if everybody sold at the current price, the difference between that current price and the price at which the bitcoins were purchased would be positive.
And it is. A profit of 0.114 BTC, or about $2,500 at current prices.
The profit number flipped positive on January 13th of this year, having been negative for most of the second half of 2022, as Bitcoin found out the hard way how much tougher things are when the money printer is turned down and interest rates are no longer zero.
What does this all mean?
So, what does this all mean? Well, nothing. Sort of.
On-chain metrics are fun to play around with, and certainly some can be nice indicators. But the above charts are just a fancy way of looking at price, really. Price go up, profit go up. Price go down, profit go down.
Not to mention, the market right now is clearly following macro news, essentially a leveraged bet that the words of Fed chairman Jerome Powell will be kind.
I did have a play around with layering the price over various charts, trying to ascertain whether there was an impact. But, nah.
Nevertheless, despite the lack of predictive power here, it is an interesting way to view the dynamics of Bitcoin and gauge the overall sentiment of the market.
The uptick in profit metrics is clear since the start of the year, even if prices are still a magnitude below bull market levels. Whether the market continues to bet on the Federal Reserve loosening rates, or if inflation and employment numbers give it a reason to hesitate and pull back, remains to be seen.
It’s a macro world, and Bitcoin is just living in it. Stay tuned for more on-chain pieces, and we will try nail down into this relationship a bit more.
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