Data shows that only 61% of Ethereum holders made profits after the recent drop. Here’s how that compares to previous bear markets.
Ethereum holders in profit have seen a notable drop recently
In a new article on X, market intelligence platform IntoTheBlock explained how Ethereum investor profitability has improved recently. The relevant metric here is the “Historical In/Out of the Money,” which breaks down the percentage of ETH holders who are in profit, loss, and breakeven.
This metric works by going through the transaction history of each address on the blockchain to find the average price at which it acquired its coins. If this base price for a wallet was lower than the current spot price of the asset, then that particular investor can be considered to be in a profitable position at the current time.
IntoTheBlock classifies these addresses as being “in the money.” Similarly, holders of the opposite type, i.e. those that are underwater, are classified as “out of the money.”
Addresses whose acquisition level is exactly equal to the current spot price of the cryptocurrency are considered to be in equilibrium and are said to be “at the money”.
Now here is a chart that shows the trend of Ethereum In/Out of the Money history over the past few years:
Looks like the holders in profit have been declining in recent days | Source: IntoTheBlock on X
As seen in the chart above, the total percentage of Ethereum addresses in the coin surpassed the 90% mark during the price rally earlier this year. However, with the bearish price action in recent months, the metric has been observed to be declining.
After the latest continuation of the downward trend, the indicator has now fallen to around 61%, which is significantly lower than the level at the beginning of the year.
Typically, investors who are taking profits are more likely to participate in the selloff at any given time, so a large number of addresses in the green can increase the chances of a selloff. For this reason, tops have historically occurred when the metric was at high levels.
Dips, on the other hand, tend to form when loss holders see their dominance reach notable levels, with profit sellers becoming exhausted at such a point.
As for whether the drop to the 61% level that the indicator experienced would be enough for Ethereum to bottom this time around as well, perhaps past data could provide some clues.
According to the analyst firm, the 2022 bear market saw the indicator bottom out at around 46%, while the 2018 bear market saw it drop to around 3%. Interestingly, the 2019/20 recovery period that followed that latest bear market saw the indicator briefly return to levels below 10%, similar to the bear’s own lows.
So, it is possible that if the current market downturn is similar to the last mid-cycle correction, Ethereum’s profitability ratio will eventually reach levels close to the 46% mark of the last bear market.
ETH Price
Ethereum opened the new week with a drop to $2,300 after remaining above $2,400 over the weekend.
The price of the coin appears to have retraced its recent recovery | Source: ETHUSDT on TradingView
Featured image by Dall-E, IntoTheBlock.com, chart by TradingView.com
