Glassnode Despite market volatility ordinary BTC investors still maintain profitability

Original Authors: UkuriaOC, CryptoVizArt, Glassnode
Original Translator: Taozhu, Golden Finance
Summary:
– Despite the chaotic price movement, investors’ profitability remains strong, with an average unrealized profit of about 120% per token.
– Demand is sufficient to absorb selling pressure and HODLer withdrawals, but not enough to promote further upward growth.
– Spot and arbitrage trading continue, especially with the increase in institutional traders, temporarily reinforcing the expectation of range trading.
Market Profitability Remains Strong
Lateral price fluctuations often manifest as investor fatigue and indifference, which seems to be the dominant reaction across all Bitcoin markets. The price of BTC is consolidating within a mature trading range. Investors remain in a generally favorable position, with over 87% of the circulating supply in a profitable state, with the cost base lower than the spot price.


Using the MVRV indicator, we can assess the scale of unrealized profits held by ordinary investors.
Currently, the average unrealized profit held by ordinary token holders is about +120%, typical of previous market trading near the previous cycle’s ATH. The MVRV ratio remains higher than its annual baseline, indicating that the macro upward trend remains unchanged.


We can use the MVRV ratio to define the pricing range to evaluate the extreme deviations of investor profitability relative to the long-term average. Historically, breaking through 1 standard deviation is consistent with the formation of long-term macro tops.
Currently, the BTC price is stabilizing and consolidating within the range of 0.5 to 1 standard deviation. This once again highlights that despite recent market volatility, ordinary investors still hold statistically high profits.


When the market decisively broke the 2021 ATH, there was a significant allocation of investors, mainly driven by the group of long-term holders. This reflects substantial profits, which help increase active trading and liquidity supply. Typically, after a new ATH, the market requires ample time to consolidate and digest the introduced oversupply. With the balance established, this will lead to a decrease in realized profits and selling pressure.
A decrease in selling pressure and profit-taking naturally reduces market resistance. Despite this, since the March ATH, the BTC price has been unable to maintain a significant upward momentum. This indicates that while demand is stable enough to maintain market range fluctuations, ultimately, the growth is insufficient to re-establish an upward trend.


Low Trading Volume
Despite strong investor profitability, the volume of transactions processed and transferred on the Bitcoin network has decreased significantly after reaching a historic high. This highlights a weakening of speculative desire and increased market indecision.
When evaluating the spot trading volume of major centralized exchanges, a similar situation can be observed. This indicates a strong correlation between on-chain network settlement and trading volume, reflecting investor fatigue.


Significant Decline in Exchange Activity
Digging deeper, we can examine the on-chain inflows to exchanges, priced in BTC, and once again notice a significant decrease in activity volume.
Currently, short-term holders are sending approximately 17,400 BTC to exchanges daily. However, this is significantly lower than the peak of 55,000 BTC/day recorded when the market reached a high of $73,000 in March, at which point speculation levels became too high. In contrast, the inflow of long-term holders into exchanges is relatively low, with a negligible daily amount of 1000+ BTC.


We can intuitively observe the sharp decline in LTH investor activity by the percentage of long-term holders’ balance sent to exchanges.
LTH is sending less than 0.006% of its total holdings to exchanges, indicating that this group has reached a balance and requires a higher or lower price to stimulate further action.


Currently, the volume of tokens transferred with profit (11,000 BTC) exceeds the volume of tokens transferred with losses (8,200 BTC). This indicates that, while relatively small in magnitude, there is still an overall trend dominated by profit-taking.


Currently, the average tokens sent to exchanges realize a profit of approximately +$55,000 and a loss of -$735. This makes the average profit-to-loss ratio 7.5 times higher, with only 14.5% of trading days recording a higher ratio.
This means that HODLers are still withdrawing, with demand sufficient to absorb selling pressure, but not enough to drive market prices higher. This indicates that the market structure favors range traders and arbitrage strategies rather than directional and trend trading strategies.


Spot and Arbitrage Basis Trading
Another tool that allows us to describe the spot market is the Cumulative Volume Delta (CVD). This indicator describes the net deviation between buyer volume and seller volume in the spot market, in US dollars.
Currently, a net seller bias dominates the spot market, but the market continues to trend laterally. This aligns with the above view that demand is roughly equivalent to selling pressure, keeping the market in a range.


When evaluating the futures market, we notice that open interest in contracts continues to rise, currently exceeding $30 billion, slightly lower than the previous peak. However, as emphasized in WoC-23, a significant portion of this open interest is related to market-neutral spot and arbitrage trading.
In a market with range fluctuations, the increase in open interest may indicate an increase in volatility capturing strategies, as traders can capture premiums from perpetual swaps, futures, and options markets.


The significant increase in open interest at the Chicago Mercantile Exchange highlights the increasing participation of institutional investors. The Chicago Mercantile Exchange currently holds over $10 billion in open interest, accounting for nearly one-third of the global market share.


In sharp contrast to the increase in open interest, futures trading volume has seen a similar decrease to the spot market and on-chain transfer volume. This indicates relatively lower speculative interest, with fixed basis trading and arbitrage positions dominating.


Summary
Despite the dramatic market fluctuations, ordinary Bitcoin investors remain fundamentally profitable. However, investor decisiveness has decreased, and trading volumes in spot, derivatives markets, and on-chain settlements are shrinking.
Demand and selling pressure seem to have reached a balance, resulting in a relatively stable price and significantly reduced volatility. The stagnation of market trends leads to a certain level of boredom, indifference, and indecision among investors. Historically, this indicates that decisive price movements in any direction are necessary to stimulate the next round of market activity.