Bitcoin Supply in Profit Drops to 41-Day Low: Price Correction Risk Ahead

Bitcoin has faced significant challenges maintaining its bullish momentum following its all-time high of $122,054 reached on July 14. Currently trading around $113,000, the leading cryptocurrency has experienced a notable 7.4% decline over the past 19 days.

This recent pullback has triggered a concerning decline in Bitcoin's supply in profit percentage, indicating weakening investor confidence across the market. As August trading continues, this downward trend could signal more substantial price corrections ahead.

Bitcoin Profitability Metrics Signal Market Cooling

According to recent Glassnode data, Bitcoin's Percent Supply in Profit metric dropped to a 41-day low of 91.71% on August 1. This critical indicator measures the percentage of Bitcoin's circulating supply currently held at profitable levels, serving as a reliable gauge of overall market sentiment.

The metric typically peaks during euphoric market rallies and declines as investor confidence begins to wane. When this percentage falls, it indicates that a growing portion of Bitcoin holders are either breaking even or recording losses on their positions.

This decline to 91.71% suggests the broader cryptocurrency market is cooling off after weeks of sustained upward price action. The shift reflects changing market sentiment, with fewer holders maintaining comfortable profit margins on their Bitcoin investments.

Futures Market Shows Bearish Sentiment Shift

Bitcoin's long-to-short ratio has moved into bearish territory, confirming that bullish conviction among leveraged traders is diminishing. Currently standing at 0.96, this metric indicates more traders are betting against Bitcoin's price than supporting it.

The long-to-short ratio measures the proportion of long positions versus short positions in Bitcoin's futures market. A ratio above 1.0 typically signals bullish sentiment, indicating most traders expect price appreciation. Conversely, a ratio below 1.0 suggests bearish sentiment, with more traders anticipating price declines.

This shift in futures market positioning could dampen short-term buying pressure, potentially leaving Bitcoin vulnerable to further price drops in upcoming trading sessions.

Technical Analysis: Key Price Levels to Watch

Bitcoin's daily trading volume has decreased significantly from July peaks, indicating reduced market participation among investors and traders. If profit-taking activity intensifies, Bitcoin could potentially decline toward the $111,855 support level.

However, market dynamics could shift if fresh demand enters the cryptocurrency space. In a bullish scenario, Bitcoin's price could regain strength and target the $116,952 resistance level. Breaking above this critical resistance would be essential before Bitcoin can attempt to rally back above the $120,000 psychological threshold.

Market Outlook and Risk Assessment

The combination of declining supply in profit metrics and bearish futures positioning creates a challenging environment for Bitcoin's short-term price performance. These technical indicators suggest the cryptocurrency market may be entering a consolidation phase after recent gains.

Traders and investors should monitor these key metrics closely as they often precede significant market movements. The current market structure indicates increased volatility potential as Bitcoin tests critical support and resistance levels.

The cryptocurrency's ability to maintain above key support levels while rebuilding bullish momentum will be crucial for determining the next major price direction in the coming weeks.

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