Recent on-chain data indicates that the Bitcoin “Supply Stress Ratio” has risen to 0.23, which could signal negative implications for the BTC market.
Bitcoin Supply Stress Ratio Suggests Market is Currently Under Strain
In a recent post on X, on-chain analytics company Glassnode discussed the current trends in the Bitcoin Supply Stress Ratio. This “Supply Stress Ratio” is defined by the firm as an indicator that reflects “the relative magnitude of supply in loss.”
The BTC Blockchain transactions are publicly accessible, allowing anyone to review the transaction histories of users. This makes it possible to track investor cost basis and profit-loss statuses.
The cost basis of holders, often referred to as the Realized Price, can be deduced by assuming that the last transaction of any cryptocurrency token marks the last moment it changed ownership. Essentially, the price at that moment serves as its acquisition value.
By comparing this cost basis to the current spot price, one can determine whether the coin is held at a profit or loss. The Supply Stress Ratio specifically uses this information to compute its value.
If the indicator’s value is zero, it indicates no portion of the BTC supply is being held at a loss, meaning the market is free from ‘stress’. This scenario typically occurs when the asset’s price is reaching new all-time highs (ATHs).
In more typical periods, the metric remains above this level, indicating some investors are experiencing losses. A higher indicator value signifies a greater portion of the supply is at a loss, thus increasing market stress.
Here’s a chart shared by Glassnode, illustrating the trend of the Bitcoin Supply Stress Ratio over the past year:
The metric has shown an uptick in recent weeks | Source: Glassnode on X
The chart indicates that the Bitcoin Supply Stress Ratio has increased recently, coinciding with bearish price movements in the asset. The current value stands at 0.23, the highest level since September. “Historically, values exceeding 0.2 have indicated periods of increased market stress,” notes the analytics firm.
Additionally, the chart features data from two other metrics. The red line represents the Realized Price of the Supply in Loss, reflecting the average price at which loss holders bought their coins. The blue line indicates the Realized Price of the Supply in Profit.
The stress faced by loss-bearing investors is evident from these metrics, as the current spot price is significantly below the red curve.
So far, Bitcoin has shown stabilization around its lows, but it remains to be seen if the downturn has concluded or if further declines are forthcoming. A continued drop would likely elevate the Supply Stress Ratio. “An ongoing rise in the value could indicate mounting market pressure, potentially reflecting a broader shift in sentiment,” explains Glassnode.
BTC Price
Bitcoin has been trading sideways lately, hovering around the $83,000 mark and yielding flat returns this week.
The trend in the BTC price over the last 30 days | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, chart from TradingView.com
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