Bitcoin‘s (BTC) strong performance last year enabled many investors to profit following the 2022 bear market. However, the current state of unspent transaction outputs (UTXOs) in profit could potentially endanger BTC prices. Profitable UTXOs represent a percentage of cryptocurrencies that were worth less at the time of their creation compared to their current value, while UTXOs in loss are tokens worth less now than at creation.
These metrics are crucial in identifying market peaks and troughs. Data from CryptoQuant shows that 88.63% of UTXOs are in profit. Historically, when profitable UTXOs reach 95%, a Bitcoin price correction occurs. Thus, if the crypto price rises, converting more UTXOs into profit, a significant drop may follow. This theory is also confirmed by on-chain analyst SimonaD.
SimonaD, who published her analysis on CryptoQuant, noted that the last time the market saw over 95% of UTXOs in profit was during the 2021 bull market. She emphasized the importance of paying close attention to this area if it is approached or surpassed in the future.
The analyst continued to monitor whether investors were cautious, but the estimated leverage ratio (ELR) suggested otherwise. ELR indicates the average leverage used by investors in the market. A decreasing ELR implies that investors are taking lower-leverage risks. However, Bitcoin’s ELR had increased, indicating that investors were making significant investments based on price movements.
Furthermore, 49.79% of the 24-hour open positions were short, suggesting uncertainty among investors about BTC’s potential direction. Currently, BTC might continue to trade sideways, exposing both long and short positions to liquidation risks. Data from Glassnode revealed that Bitcoin’s STH-SOPR had risen to 1.02.
STH-SOPR assesses the behavior of short-term holders using sensitivity shown within 155 days. Values below 1 for STH-SOPR indicate a good entry point for buyers. At the time of writing, Bitcoin’s STH-SOPR suggests that an exit from the market might be approaching. Bitcoin’s price could drop to $42,000, while there is a widespread expectation that the 2024 bull market could propel prices to new all-time highs (ATH).