Bitcoin Upside Hinges On Liquidity Rising Above This Level, Glassnode Says

A report from on-chain analytics firm Glassnode has highlighted how transitions into strong upside phases have historically required liquidity to hold above a key threshold.

When the value of this metric is greater than 1, it means the holders as a whole are realizing a higher amount of profit than loss. On the other hand, the indicator being under the threshold suggests loss-taking is dominant on the network. Naturally, if the Realized Profit/Loss Ratio is exactly equal to 1, the average holder can be assumed to be just breaking even on their selling, with profits and losses being harvested on the blockchain exactly canceling each other out.

Now, here is a chart that shows the trend in the 90-day moving average (MA) of this Bitcoin indicator over the past decade:

At the peak, the metric’s value reached close to 20, indicating profits outweighed losses by nearly 20 times, but recently, it has slipped all the way down to a level less than 2. Profit-taking is still dominant in the sector from the perspective of the indicator, but profits are less than double the losses now.

According to Glassnode, transitions into strong upsides have historically required this metric to rise and hold above a value of 5. Currently, the metric’s trajectory is still pointing down, so it’s uncertain whether it will see any improvement in the near future and if it does, whether it will climb back above this threshold.

That said, twice in this cycle alone, Bitcoin liquidity has gone under this level and managed to return above it. Though in both of those instances, it found a bottom at levels noticeably above the current value.

At the time of writing, Bitcoin is floating around $87,800, down 2.4% over the last seven days.