Bitcoin’s Profit-Loss Ratio Hits Lowest Level In Over Three Years, Some See A Bottom Forming

Bitcoin’s realized profit and loss ratio has dropped to -0.35, its lowest reading in 43 months, a level that has historically lined up with market bottoms even though it currently signals widespread losses across holders.

A Rare Reading With A Track Record

The ratio, which measures the net share of Bitcoin supply sitting in profit versus loss, hasn’t been this low since December 2022, just after FTX collapsed and pushed Bitcoin below $16,000. The indicator has historically pinpointed Bitcoin bottoms with unusual accuracy, pointing to similar dips in 2015 and 2019 that preceded price rallies.

Sentiment Improving After A Rough Stretch

The reading arrives after Bitcoin fell more than 50% from its October high of $126,080, with market sentiment repeatedly touching near-record lows along the way. Sentiment has ticked up cautiously over the past ten days, with Bitcoin gaining over 7% since bottoming near a two-year low of $58,190 on June 25. Much of the earlier selloff was tied to Strategy, whose Stretch preferred stock fell below its $100 par value and raised concerns about the sustainability of its dividend model.

Bitwise chief investment officer Matt Hougan said the Stretch situation helped clear out excess leverage in the market, moving Bitcoin a step closer to a bottom. He said he expects a new bull market to begin in the fall.

“The Bottom Never Announces Itself”

Bitcoin is trading only 16% above its realized price, a level that has historically preceded strong returns over six and twelve months. Buying now feels uncomfortable but argued that discomfort is exactly what makes it a discount, cautioning against waiting for a clearly marked bottom that may never arrive.