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- 92% of Bitcoin supply in profit shows strong market optimism.
- Falling NVM and S2F ratios hint at weakening fundamentals.
- Exchange inflows suggest potential sell-side pressure building.
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Bitcoin [BTC] has surged to a notable milestone, with 92% of its circulating supply currently in profit. Historically, such high levels of profitable supply often preceded powerful bullish rallies — though they also carried the risk of triggering profit-taking waves.
This signals broad market strength, as most holders are now in gains, fueling optimism across the crypto market. However, this same euphoria can spark corrections if sentiment overheats and traders rush to secure profits.
Falling NVM Ratio Flags Weakening Network Activity
Despite the bullish profit signals, Bitcoin’s Network Value to Metcalfe (NVM) Ratio dropped by 4.54%, raising concerns about its valuation relative to underlying network activity.
The NVM ratio compares market capitalization to the strength of network connections, serving as a proxy for fair value. A decline suggests that price may be running ahead of fundamentals. Historically, such drops have often preceded slower growth or weaker price expansions, hinting that Bitcoin’s market momentum could be cooling.
Stock-to-Flow Model Weakens Amid Scarcity Doubts
Adding to the uncertainty, Bitcoin’s Stock-to-Flow (S2F) ratio plunged 42.86%, reflecting diminishing confidence in one of the market’s most cited scarcity models.
S2F measures scarcity by comparing circulating supply to issuance rates. A sharp drop signals that scarcity-driven valuation narratives are losing strength. While many analysts have long questioned the S2F model, its sudden decline reinforces concerns about Bitcoin’s long-term supply dynamics.
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Liquidity Flows Point to Caution
Bitcoin’s spot exchange flows showed a net positive inflow of $39.13 million, suggesting traders are moving assets onto exchanges — often a precursor to selling. Sustained inflows can increase sell-side pressure, while outflows usually indicate accumulation.
Also Read: Capital Group Turns $1B Bitcoin Bet Into $6B Fortune
The current mix of inflows and outflows reflects cautious market positioning, with no clear bullish or bearish dominance.
While 92% of Bitcoin’s supply being in profit highlights strong market sentiment, falling NVM and S2F ratios plus shifting exchange flows reveal cracks beneath the surface. The market’s outlook is uncertain, and traders should remain cautious as optimism collides with weakening fundamentals.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
