On-Chain Data School (3): Have the Whales Accumulating at the Bottom Already Taken Profits?
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On-Chain Data School (3): Have the Whales Accumulating at the Bottom Already Taken Profits?
The top is usually accompanied by a massive Realized Profit.
Navigating Web3 tides with focused insightsAuthor: Mr. Bag
🔸TL;DR
- This article introduces the on-chain metric Realized Profit.
- Realized Profit shows the daily volume of market participants taking profits and exiting their positions.
- Large spikes in Realized Profit are typically driven only by holders with low-cost basis.
- Market tops are often accompanied by significant spikes in Realized Profit.
🟡 Introduction to Realized Profit & Realized Loss
Realized Profit, translated as "已实现利润" (realized profit), calculates the total daily profit taken from Bitcoin transactions. It does this by comparing the price at which each BTC was transferred “last time” versus its price during the “previous transfer.”
The total sum of profits from all BTC that were sold for a gain on a given day gives us the daily Realized Profit.
Conversely, if the current transfer price is lower than the previous one, it is recorded as a "Realized Loss."
(Chart: Realized Profit & Realized Loss)
🟡 Large Spikes in Realized Profit Are Typically Driven Only by Low-Cost Holders
As shown in the diagram below, high-cost holders have limited profit margins. Therefore, when they sell, the amount of Realized Profit generated is relatively small.
Hence, when we observe large spikes in Realized Profit, it usually indicates that low-cost basis holders are selling their BTC.
(Illustration: Realized Profit Calculation)
🟡 Market Tops Are Often Accompanied by Large Spikes in Realized Profit
When a large number of low-cost basis holders begin selling their BTC, we see a clustered spike in Realized Profit on the chart.
At this point, most remaining market participants are those who bought at higher prices, meaning market price is close to their cost basis. Once sentiment shifts slightly, these holders are more likely to panic-sell, triggering a downward price spiral and forming a market top.
(Market tops often coincide with large spikes in Realized Profit)
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