Unspent transaction outputs (UTXOs) are an integral component of Bitcoin’s structure, essentially serving as the building blocks of the blockchain. As its name suggests, each unspent transaction output represents a discrete unit of Bitcoin that hasn’t been spent, originating from the conclusion of a previous transaction. They form the foundation of Bitcoin’s ledger, tracking the specific outputs of transactions until they’re used in a new one.

Analyzing UTXOs usually involves tracking whether they’re in profit, meaning the BTC associated with them was acquired at a price lower than its current value. Thus, the percentage of UTXOs in profit is a crucial indicator of market sentiment and the overall profitability of Bitcoin holders. A high percentage signals a strong market where most investors see gains, while a lower percentage points to losses and reflects a more bearish environment.

UTXOs differ from Bitcoin’s total supply in a critical way. While the percent of UTXOs in profit tracks individual transaction outputs, the percent of Bitcoin’s supply in profit looks at the total Bitcoin supply and whether the coins are currently above or below their acquisition cost. UTXOs can be numerous and reflect various sizes of Bitcoin holdings, from small fractions to larger amounts.

Conversely, when measuring supply in profit, the focus is on the aggregate volume of Bitcoin, treating the total supply as a whole rather than individual pieces of the blockchain ledger. This difference explains why the percent of UTXOs in profit can diverge from the percent of supply in profit—UTXOs, as smaller units, might be skewed by the activity of smaller traders. In contrast, supply in profit gives a broader picture of the overall state of the market.

For example, when Bitcoin’s price surged at the beginning of March, both UTXOs in profit and the supply in profit hit their year-to-date highs, with both metrics nearing 100%. At this point, nearly all Bitcoin, regardless of how it was distributed across UTXOs or in total supply, was in profit, reflecting the bullish environment that came with Bitcoin nearing $73,000. This period represents an optimal state for holders, with minimal losses and maximum market confidence.

Meanwhile, drops in Bitcoin’s price led to a drop in the percentage of UTXOs and supply in profit. The percentage of UTXOs in profit hit a YTD low of 65.09% on Sep. 7 when Bitcoin dropped to $54,170, while the supply stood slightly higher at just over 70%.

The divergence between these two metrics during periods of price volatility is telling. Given their sensitivity to transaction size and the frequency of movement in smaller amounts, UTXOs fluctuate more dramatically.

As prices drop, smaller holders or frequent traders who acquired Bitcoin at varying levels will likely see their UTXOs fall out of profit quickly. On the other hand, the total supply in profit metric remains somewhat more stable as larger long-term holders who acquired Bitcoin during earlier phases of the cycle may still see their positions in profit. This difference highlights the distinction between short-term market activity and the broader view of Bitcoin’s overall valuation.

Throughout the year, both metrics have closely followed Bitcoin’s price movement, peaking when prices are high and dropping sharply during pullbacks. The fall to yearly lows on Sep. 7, where the percentage of UTXOs in profit and the supply in profit hit significant lows, reflects a shift in market sentiment.

The sharp decline signals increased stress in the market, with a substantial portion of recent buyers now facing losses. This could indicate an environment where capitulation becomes more likely, as holders who purchased during the peak of the price surge may begin to sell to cut their losses. At the same time, a lower percentage of UTXOs in profit suggests increased volatility as smaller holders become more susceptible to selling pressure.

The current values for UTXOs in profit, supply in profit, and Bitcoin’s price paint a nuanced picture of the market. With UTXOs in profit sitting at 67.64% and supply in profit at 74.15% as of Sep. 10, in conjunction with Bitcoin’s price of $57,035, the market appears to be in a phase of cautious consolidation. These values indicate that while a substantial portion of Bitcoin holders are still in profit, many recent buyers, particularly those who entered the market during the later stages of the price surge, are now underwater or close to it.

The disparity between UTXOs in profit and supply in profit offers insight into how different groups of market participants are faring. With supply in profit being higher, it suggests that larger or longer-term holders, who likely bought at lower prices, are better positioned compared to smaller or more recent buyers.

UTXOs, which are more sensitive to smaller transactions, show that more recent or frequent market participants are facing losses. This implies that there has been a recent shift in market sentiment, where short-term traders or smaller investors are feeling the pressure of Bitcoin’s pullback from its highs.

Since Bitcoin’s price is now higher than its recent low of $54,170 on Sep. 7, but both UTXOs in profit and supply in profit remain relatively low compared to earlier in the year, the data suggests the market is in a recovery phase but has not yet fully regained confidence. The lower percentages reflect that while Bitcoin’s price has rebounded slightly, the damage from previous price declines is still evident in the market structure.

This combination of factors typically points to a market in consolidation, where some participants are waiting for more evident signs of a sustained price recovery before re-entering or committing to holding their positions. The market seems to be in a transitional phase — no longer in full bull market territory but not in a total capitulation zone either.

If prices stabilize or rise from current levels, the percentage of UTXOs and supply in profit should start to increase, signaling renewed confidence. However, if Bitcoin’s price dips further, particularly below key psychological levels, it could push more holders into loss territory, heightening the risk of further sell-offs.

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Bitcoin’s extreme volatility this week has wiped out a significant amount of unrealized profits across the entire market.

Data from Glassnode showed that on Aug. 1, over 85% of Bitcoin’s circulating supply was in profit, reflecting a stable and enduring bullish sentiment as the price settled at around $65,000. However, as the price began declining over the past week, a huge chunk of this profitability was wiped away.

With Bitcoin dropping to below $50,000 on Aug. 5, the percentage of supply in profit fell to 71%, the lowest since October last year. Even though the price recovered to around $56,000 on Aug. 6, the supply in profit remains at just above 73%.

Both long-term and short-term holders saw a sharp increase in their supply held in loss.

On Aug. 1, STHs held 1.603 million BTC in loss, but this figure rose to 2.868 million on Aug. 5 before decreasing slightly to 2.804 million BTC the next day. This shows that over 1.2 million BTC was bought at prices higher than current market prices, and STHs are sitting on a significant amount of unrealized losses.

The short-term supply in profit plummeted as well. Between Aug. 1 and Aug. 5, the STH supply in profit fell from 1.490 million BTC to just 190,724 BTC, recovering slightly to 236,790 BTC on Aug. 6.

Long-term holders also saw losses, although significantly less pronounced than their STH counterparts. Long-term holder supply in profit decreased from 13.486 million BTC to 12.908 million BTC between Aug. 1 and Aug. 5.

Meanwhile, long-term holder supply in loss grew 148,601 BTC on Aug. 1 to 760,521 BTC on Aug.5, decreasing slightly to 704,926 BTC on Aug. 6. This gradual increase indicates that even LTHs are not entirely insulated from market volatility, though their broader time horizon offers some cushion.

Looking at the entity-adjusted NUPL for long-term and short-term holders provides a clearer and more refined understanding of actual market profit and loss. Previous CryptoSlate analysis found that entity-adjusted metrics, especially NUPL, filter out non-economic transactions, which include internal transfers within the same entity.

These internal movements can distort traditional metrics by creating the false impression of heightened market activity or profit-taking, leading to an inaccurate representation of market sentiment.

The current data shows that the entity-adjusted LTH-NUPL has remained consistently above 0.5 throughout the year, reflecting a sustained belief among long-term holders in Bitcoin’s upward trajectory.

As of Aug. 6, LTH-NUPL stands at 0.625, indicating that long-term holders still have significant unrealized profits despite recent price fluctuations.

On the other hand, the entity-adjusted STH-NUPL saw significantly more volatility, dropping into negative territory in response to Bitcoin’s price drop. As of Aug. 6, STH-NUPL is at -0.111.

While short-term holders faced substantial unrealized losses and reacted more dramatically to price drops, long-term holders maintained a relatively stable outlook.

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Bitcoin‘s swift climb above $64,000 has put most of the industry green. Alongside the rest of the market, Bitcoin reversed weeks of negative performance upon news of the assassination attempt of former US President Donald Trump.

The market’s increase in profitability can be seen through the percentage of Bitcoin’s supply in profit. While the metric is simple, it provides a clear snapshot of the market’s health and shows the distribution of gains and losses.

Data from Glassnode showed the percentage of supply in profit increased from 73.67% on July 7 to over 87.29% by July 15. It represents a significant increase and confirms the extent of the positive sentiment in the market. This could potentially encourage further buying pressure as the market becomes more profitable for a large segment of short-term holders.

The profitability and sentiment of short-term holders (STHs) are best assessed through the net unrealized profit/loss (NUPL). NUPL measures the difference between the market value and the cost basis of held coins, offering a real-time gauge of whether the cohort is in a state of profit or loss. For STHs, who tend to be more sensitive to price fluctuations and market changes, a positive NUPL indicates a favorable environment, potentially reducing selling pressure and fostering a more stable market. Conversely, a negative NUPL might signal distress among short-term traders, increasing the likelihood of selling and market volatility.

Data from Glassnode showed that NUPL turned positive on July 15 as BTC crossed $64,000. It represents a culmination of a gradual increase we’ve seen over the past week or so, with STH NUPL increasing from -0.1456 to 0.0076. This is a critical indicator of market recovery and growing optimism among recent buyers. It suggests that the market is absorbing new demand effectively, and short-term traders are beginning to see positive returns on their investments.

Market value to realized value (MVRV) is another critical metric for assessing STH profitability. It compares Bitcoin’s market value to its realized value, providing a ratio that reflects the current market conditions relative to the cost basis of recent investments. An MVRV ratio above 1 indicates that the market value is higher than the realized value, suggesting that investors, on average, are in profit. For STHs, a rising MVRV ratio indicates increasing profitability, which can boost confidence and reduce the selling pressure.

Like the STH SOPR, the STH MVRV increased from 0.8728 on July 7 to 1.0076 on July 15. This metric moving above 1 for the first time since June 20 indicates that short-term holders’ market value now exceeds their cost basis. This crossover point is a bullish signal, often suggesting that the market is recovering and short-term holders are gaining confidence as their holdings become profitable.

The improvement we’ve seen in both NUPL and MVRV ratios shows a significant shift in the profitability of short-term holders. The consistent rise in these price and profitability metrics creates a solid foundation for the bullish trend to continue in the coming weeks. As more STHs move into profit, the potential selling pressure they create might decrease, allowing for a more sustained price increase.

However, a sharp price correction can potentially wipe away this unrealized profit and push STHs back into the red. The reactive nature of this cohort means any negative news could flip the trend and create losses.

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