Understanding PSIP: A Key Indicator of Market Sentiment

According to BlockBeats, the Percent Supply in Profit (PSIP) is a significant on-chain metric that measures the proportion of circulating Bitcoin ($BTC) that is in a profitable state. This indicator is calculated by comparing the last transfer price of each $BTC with its current price. If the current price exceeds the last transfer price, the $BTC is considered to be in profit. PSIP serves as a guide to market sentiment and has applications in both identifying market tops and bottoms. When the majority of $BTC holdings are at a loss, it often signals a good buying opportunity, as fewer holders are likely to sell at a loss, reducing selling pressure. Conversely, when most holdings are profitable, the market may experience increased selling pressure as holders look to realize gains. Historically, Bitcoin has shown precise bottoming signals when PSIP falls below 50%, indicating a potential buying opportunity. However, a high PSIP alone does not necessarily indicate a market top, as the maximum value of profitable holdings can reach 100%. An interesting approach is to observe the correlation between PSIP and price changes, which can provide insights into market dynamics. This concept is further explored in analyses such as 'The Market Pulse – Week 36, 2022.' For those interested in delving deeper into on-chain data analysis, following this series of articles is recommended. The series aims to provide a comprehensive understanding of on-chain metrics and their implications for market behavior.