This amount of profit-taking has not been witnessed since December 2020, according to data from the on-chain analytics firm Santiment. The “ratio of daily on-chain transaction volume in profit to loss” is the key metric here. It quantifies the ratio of Bitcoin volume of profit-taking transactions to Bitcoin volume of loss-taking transactions, as the name implies.
This indicator shows us whether there is more profit harvesting in the market than loss realization or not right now. If the profit volume is higher, the indicator has a positive value. Otherwise, it’s a no.
The indicator operates by scanning the on-chain history of each coin being sold/transferred to determine the latest price at which it was changed. If the previous selling price for any coin was less than the current BTC value, then that coin moved at a profit, and thus its transaction is included in the profit volume. Similarly, if the most recent price exceeds the most recent value, the coin’s sale contributes to the volume lost.
Finally, here’s a graphic that displays the trend in the profit-to-loss ratio of daily on-chain transaction volume for Bitcoin and Ethereum over the last year:
The graph above illustrates that the Bitcoin profit-to-loss volume ratio has significantly increased in the last several days. The indicator has seen an even stronger jump with the recent surge in the price above the $27,000 threshold (which only lasted briefly before the coin sank back under the mark).
During this rise, the metric has reached a value of about 1.4, implying that the volume of profit-taking transactions is roughly 2.4 times that of loss-taking transactions. This signal level has been at its greatest since December 2020, when the 2021 bull run was just getting started.
This large profit volume suggests that investors are afraid of dips right now, therefore they hurried to take profits as soon as the price broke above $27,000. Profit-takers’ selling pressure was most likely responsible for the drop to the $26,000 mark.
The figure illustrates that the volume of profit-taking in Ethereum has also increased dramatically in the last several days. Yet, the cryptocurrency has only seen the maximum value of the indicator since the middle of 2023, which is a little further back than Bitcoin.
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