The Bitcoin market faces a critical moment amid soaring unrealized profits

Bitcoin crossed $60,000 on Feb. 28 in a remarkable one-day candle, posting a 20% increase in just three days. However, the short stint at this level means we’ll have to wait another 24 hours before any meaningful on-chain data becomes available.

However, the possibility of a correction within the next 24 hours can be analyzed, given the amount of unrealized profits currently in the market.

Unrealized profits refer to the gains on Bitcoin holdings that have not yet been sold or converted into fiat or other assets. These are calculated by the difference between the current market price and the purchase price of Bitcoin, provided the current price is higher.

The Net Unrealized Profit/Loss (NUPL) metric offers insights into the overall market sentiment by mapping out the difference between unrealized profit and loss across the entire Bitcoin supply, expressed as a proportion of the market cap.

Meanwhile, adjusted-NUPL (aNUPL) refines this analysis by accounting for inert supply — coins lost or dormant for over seven years — thereby providing a clearer view of the active market’s profitability.

The aNUPL values observed over the past three days — 0.4232 on Feb. 25, 0.4515 on Feb. 26, and 0.4729 on Feb. 27 — show that a growing portion of the Bitcoin supply is profitable.

Graph showing the aNUPL for Bitcoin from Jan. 30 to Feb. 27, 2024 (Source: Glassnode)

This is further seen in the increase in profit percentage from 55.795% to 59.174% and the decrease in loss percentage from -0.682% to -0.155% over the same period. Like aNUPL, this metric shows that most of Bitcoin’s supply is held at a profit, with minimal losses.

Graph showing the relative unrealized profit for Bitcoin from Mar. 1, 2023, to Feb. 27, 2024 (Source: Glassnode)

The percent supply in profit, reaching 95.12% on Feb. 27, and the adjusted percent supply in profit at 93.6% show this profitability from a slightly different angle.

Graph showing the percent (blue) and adjusted percent (orange) of Bitcoin’s supply in profit from Feb. 1 to Feb. 27, 2024 (Source: Glassnode)

If Bitcoin continues to increase in the coming weeks, this current state of widespread profitability can translate to reduced selling pressure. Anticipating further growth, holders might be less inclined to sell their assets, leading to reduced volatility and creating a foundation for a more stable price increase.

The current state of profitability could reinforce bullish sentiment among investors if there are further price increases. The significant inflows into spot Bitcoin ETFs in the US, especially BlackRock’s IBIT, suggest a segment of the market — comprising institutional and sophisticated investors — is poised to deploy capital into Bitcoin, buoyed by the positive trends and the fear of missing out (FOMO).

However, choppy and sideways price movements can lead to higher volatility. With a significant portion of the market in profit, the temptation to realize these gains could trigger large-scale sell-offs, especially if fears of a market peak or negative news emerge in the coming days.

While the prevailing sentiment is bullish — driven by widespread profitability and institutional interest — the market must navigate the potential challenges posed by unrealized gains. The following 24 hours are crucial in determining whether Bitcoin can maintain its foothold at $60,000 or if the pressure to realize profits will catalyze volatility.

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