Financial analysts rely on a wealth of data to make informed trading decisions. Options traders, for instance, can examine implied volatility, Greek values, and the Black-Scholes model to inform their trades. However, some data in most markets remains hidden from traders due to its private nature. Equity traders, for example, can’t access the balance of a specific private portfolio at any given time, which can make decision-making challenging when not all data is available.
Blockchain technology, on the other hand, is entirely public. This means that every transaction, wallet address, and historical portfolio is visible at all times, providing traders with an unprecedented amount of data to utilize. One particularly interesting data point is the percentage of wallets that are currently in profit, indicating that the average price at which Bitcoin (BTC) was acquired is lower than the current price.
Time to Buy Bitcoin Revealing Intriguing Patterns
This percentage is often graphed, starting from the launch of Bitcoin to the present day, revealing intriguing patterns. In the early years of Bitcoin, the percentage of profitable wallets fluctuated significantly, dropping from 99% in June 2011 to below 15% by November 2011. After hitting lows in November 2011, the percentage never dropped below 28%.
Since then, the percentage has generally been on the rise, largely due to Bitcoin’s substantial price increases over the past decade. If you purchased Bitcoin in the past ten years, you are likely in profit. However, some wallets are not currently profitable, likely having purchased Bitcoin near its all-time highs (ATHs) in early March. As of the time of writing, nearly 90% of wallets are in profit.
This raises the question of whether Bitcoin’s price can continue to rise. Common sense suggests that if 9 out of 10 people are in profit, they are more likely to sell, potentially causing the price of BTC to decrease. While BTC has experienced a slight pullback over the past month, many holders are still not selling, indicating bullish sentiment not just in the short term but possibly for years to come.
Primary Factors
Two primary factors bolster this optimistic outlook: the Bitcoin cycle hypothesis and the promise of widespread adoption.The Bitcoin cycle is a roughly four-year trend that has existed since Bitcoin’s inception, characterized by price lows, climbs before halvings, new highs, and subsequent falls to new lows. If this cycle continues into 2024 and 2025, Bitcoin could soar above $100,000. With the introduction of spot exchange-traded funds (ETFs) and increased institutional investment, some argue that BTC’s price is only beginning to rise.
While the percentage of wallets in profit provides valuable information to traders, it does not offer a definitive view of Bitcoin’s future. It simply adds to the array of data available to assist traders in making informed decisions. Ultimately, how this data is interpreted is at the discretion of each individual trader.
