Ever wondered how seasoned crypto investors seem to know the best times to buy and sell? It's not magic; it's often about understanding on-chain data – real-time information recorded directly on the blockchain. One powerful, yet beginner-friendly, metric is "Supply In Profit/Loss (%)."
What is "Supply In Profit/Loss (%)"?
Simply put, this metric shows you the percentage of all Bitcoin (or another cryptocurrency) currently held by investors that is either sitting on a profit (they bought it for less than the current price) or a loss (they bought it for more).
When a large portion of the supply is in profit, it suggests widespread optimism. Conversely, when a significant portion is in loss, it indicates market distress and potential undervaluation.
Where to Find This Data
You can access this data on various on-chain analytics platforms. The video highlights ChainExposed, but many other sites like Glassnode or CryptoQuant also offer similar metrics. For this guide, we'll refer to the data principles shown in the video.
How to Use "Supply In Profit/Loss (%)" to Spot Opportunities
This metric can be a great contrarian indicator, meaning you do the opposite of what most people are doing. The core idea is to buy when most people are at a loss (fear) and consider selling when most people are in profit (greed).
Step-by-Step for Buying (When to Be Brave)
- Access the Chart: Navigate to the "Supply In Profit/Loss (%)" chart for Bitcoin on your chosen on-chain analytics platform.
- Look for High Loss Percentage: Pay close attention to the chart when the percentage of "Supply In Loss" (or conversely, "Supply In Profit" dropping below 50%) is high. The video suggests looking to buy when the "Supply In Profit" is less than 50% (meaning more than half of the supply is at a loss). This indicates that a majority of holders are currently underwater on their investments.
- Consider Buying: Historically, periods where a large portion of the market is at a loss have often preceded price recoveries. This is typically a time of high fear, which savvy investors see as an opportunity to buy assets at a discount.
Step-by-Step for Selling (When to Be Cautious)
- Monitor for High Profit Percentage: Keep an eye on the chart as the price of Bitcoin increases and the percentage of "Supply In Profit" climbs significantly.
- Identify Overheated Markets: The video suggests considering selling when the "Supply In Profit" percentage gets very high, closer to 90-100%. At these levels, nearly all Bitcoin holders are profitable.
- Consider Selling: When almost everyone is in profit, there's a higher likelihood that some investors will start selling to lock in their gains. This increased selling pressure can lead to a price correction or a market peak.
Important Considerations for Beginners
While "Supply In Profit/Loss (%)" is a powerful tool, it's crucial to remember that no single indicator guarantees future price movements. Crypto markets are volatile, and many factors influence price. Always do your own research and consider combining this on-chain metric with other forms of analysis.
Start with small amounts, invest only what you can afford to lose, and never put all your eggs in one basket. Using such data can significantly enhance your understanding of market cycles and help you make more informed decisions.
Imagine if you could consistently spot those moments when the market was feeling the most pain, and those times when everyone felt like a genius. What kind of financial freedom might that unlock for your future, even with just a small start?