Analyze the current “profit booking” trend in the Bitcoin market

Bitcoin broke above the psychological level of $60,000 less than a week ago. Since then, it has already spent considerable time below the $63,000 threshold. Even at the time of writing, BTC was seen trading hands at $62,400.

The period near the ATH is considered quite tricky for several reasons. First, the coin is usually tested and rejected multiple times at past resistance levels. Second, at this point most HODLers are generally for-profit and in retrospect the incentive to sell intensifies.

Regarding the first factor, Bitcoin has already been rejected at $62.9k a few times in the recent past. This last factor also seems to come into play gradually.

The collection phase

At this point, nearly 98.34% of the coins are held at an unrealized gain. So, to analyze whether for-profit HODLers have started cashing in or not, let’s take a look at the state of the URPD metric. Simply put, the UTXO realized price distribution assesses the distribution of prices at which the circulating supply was last spent.

According to the table below, approximately 311.8k BTC was last moved to higher prices [above $60.1k]. Notably, owners of the aforementioned coins have weathered the turbulent phase of the past few months and exited as soon as they recovered the bare minimum.

Source: Glassnode

Additionally, over the past 7 days, the LTH net position change metric has started projecting a downward slope on its chart, confirming that long-term HODLer spending has continued as of late.

Usually, long-term HODLer spending coincides with the price breaking past previous highs. So, in the coming days, as the price of BTC breaks above the $64,000 benchmark and trades higher, we can expect the selling behavior to continue.

Moreover, the days of destroyed parts also highlighted a similar trend. Whenever this metric increases on its chart, it implies that older coins are being spent in strength. Conversely, a downward trend indicates the phase of slow spending/accumulation.

Over the past week, CDD has seen an early bullish sign, confirming that more days of coins have been destroyed than the long-term average. That said, it should also be noted that during most recent bull runs, such a trend has been observed and the market has more often than not been able to absorb the selling pressure.

Source: Glassnode

However, at this point, it should be kept in mind that STH’s supply distribution has hovered around its all-time low. [17%]implying that the market has not yet entered the “bubble” phase – which is pretty healthy.

According to one of CryptoQuant analysts, bubbles form when the momentum of short-term returns attracts enough money and the composition of investors shifts from long-term to short-term. During these phases, people somehow voluntarily engage in short-term participation to reap the benefits of market strength. Indeed, after a while, the bubble tends to burst.

The same was seen during the bull phase of 2013 and the bull trend period of 2017-18. Well, there is still enough time for such a scenario to play out as new highs have not yet been reached by BTC and FOMO is far from its peak.

Source: Twitter

Overall, old coins spent during an uptrend are just an integral part of the investment process and outflows initiated by a particular range would either be absorbed by the market or offset by new inflows over the long term.