Summary

BTC supply in profit and loss is an important on-chain indicator for identifying cyclical bottom zones. When profitable supply and loss-making supply cross, it means spot price has fallen below the cost basis of a large share of market holdings. Loss-making supply is approaching the upper limit of active coins that can realistically be pushed underwater, putting the market into a seller-exhaustion watch zone. This signal can raise confidence in a bottom-zone judgment, but it is not a precise timing tool. A stronger bottom confirmation still requires profitable supply to recover and the two lines to separate again, indicating a reset in the market’s cost structure.

KTX Crypto Portfolio Note

For the KTX Crypto portfolio, this community view is best treated as the first type of on-chain bottom-zone signal, not as an immediate full-position buy order:

• Profit/loss supply crossover: BTC enters a cyclical bottom watch zone, and the portfolio can start building a bottom-signal checklist.
• Loss supply stays elevated: the drawdown is deep enough that seller pressure may be close to exhaustion, but the duration of bottoming remains uncertain.
• Profitable supply rises and the two lines separate again: this is a stronger structural-repair confirmation and can become one condition for increasing portfolio risk exposure.
• If additional cyclical indicators later point to the same conclusion, confidence and sizing for a bottom-fishing plan can increase together.

Original Post Collection

Recently, I reviewed several cyclical indicators that have historically maintained a high win rate, and I hope to organize them into a tweet series to share with everyone.

We should not simply copy historical patterns mechanically. We also need to understand the logic behind them. When more and more signals appear and point toward the same conclusion, they can improve our confidence and success rate when trying to buy near the bottom.

Today is the first post:

The first signal for a cyclical bottom zone: an analysis of BTC supply in profit and loss.

The logic is a bit long. If you are interested in studying it, please read patiently. If you only want the conclusion, jump directly to the end.

Supply in Profit/Loss, or SIPL, is essentially a real-time snapshot of the market-wide cost-basis distribution. Each time price moves, a portion of BTC flips between profit and loss. How much flips depends on how many coins are clustered in the price range that has just been crossed.

In the chart, the green line is supply in profit, and the red line is supply in loss. If you zoom out across the full history, you will notice that whenever the green and red lines cross or squeeze together, they often correspond to cyclical bottom zones.

1. In early 2015, during the bear-market bottoming phase, the two lines tangled for more than half a year.
2. In January 2019, the two lines briefly crossed and then separated quickly.
3. In March 2020, during the 3/12 crash, the crossover and recovery were completed within a few days.
4. From late 2022 to early 2023, after the FTX collapse, the same structure appeared in the bottom zone.

This is not a coincidence. There is clear logic behind it.

Mathematically, when the two lines cross, it means profitable and loss-making supply are each roughly 50%. In other words, spot price has already fallen below the cost basis of about half of all market holdings.

Why is the 50% area close to a ceiling? Because a large part of circulating supply will effectively never fall into loss: ancient dormant coins, lost coins, and early low-cost coins that have never moved.

After excluding this portion, the active coins that can be pushed underwater are roughly 50%-55% of supply. That means when loss-making supply approaches 50%, nearly all coins that can realistically be in loss are already underwater, and the loss surface has little room to expand further.

Behaviorally, those who are willing to cut losses have largely already done so. What remains is held by participants who do not plan to sell. This is the on-chain definition of seller exhaustion.

The current state is that the red line has surged to about 10.23 million BTC, the highest absolute level in history. The green line has fallen back, creating a profit/loss squeeze. In percentage terms, it is in the same range as the previous four bottom zones.

But there are two reminders:

1. The crossover is a zone signal, not a precise timing signal. The 2015 episode lasted more than half a year, while March 2020 completed within a few days. It tells you that the cyclical position has arrived, but it does not tell you the exact day of the bottom.
2. What happens after the crossover is more important than the crossover itself. A true bottom confirmation requires the two lines to separate again and the green line to recover in a sustained way. That indicates underwater coins have changed hands and the market’s cost structure has reset.

In other words, we need to keep watching the depth and duration of the squeeze. The former determines the magnitude of the bottom zone, while the latter determines how long the bottoming process may take.

Of course, you can treat it as the first directional signal, then combine it with other data and indicators that I will update later to make a more comprehensive judgment and build your bottom-fishing plan.

Original author: Murphy 

X account: @Murphychen888 

Original post: https://x.com/Murphychen888/status/2064601867234271706?s=20

Risk note: This is a collected community viewpoint and does not constitute investment advice. DYOR.