Over 98% of the circulating Ethereum supply is currently in a profitable state, reaching a two-year high. This increases the risk of price adjustment as investors may seek to realize their profits.
Profit Level in Two Years
According to the cryptocurrency on-chain data analysis platform glassnode, the "Percent of Supply in Profit" indicator exceeded 98% on Thursday, a level not seen in the past two years. This key market sentiment indicator measures the proportion of coins trading at a price higher than their previous blockchain transaction price. Analysts classify coins as 'in profit' when the current price exceeds the last transaction price, and 'at a loss' when it falls below.
Historically, a figure above 95% suggests that the market is overheated and approaching a local peak. With most investors holding unrealized gains, there is a strong incentive to realize profits. Conversely, a figure below 50% indicates a market bottom, where widespread losses reduce selling pressure and create buying opportunities.
Statistics from the past two years highlight the possibility of adjustment. This indicator has exceeded the 95% threshold on four separate occasions. In two of the previous three cases, it triggered price corrections exceeding 10%, with the most recent adjustment causing a price drop of over 40%.
Caution on ETH Correction Indicator Decline
The current ETH rally was significantly driven by intensive purchases by a digital asset treasury (DAT) company in May. If these major holders decide to realize profits on a large scale, a substantial correction could occur, potentially triggered by changes in macroeconomic conditions.
Analysts suggest carefully monitoring the "Percent of Supply in Profit" indicator if a downturn appears. When a sharp decline in this indicator coincides with a steep price drop, it has historically served as a reliable signal that the market is forming a short-term bottom.
