BTC rebound pushes large loss-making supply back into profit, correction risk remains

A large volume of previously underwater BTC supply has quickly returned to profit as Bitcoin recovered recently, on-chain analyst Axel Adler Jr. said. Adler said on-chain data showed the 90-day rate of change in the share of supply in profit fell to -19% in early August, meaning a substantial amount of supply shifted from profit to loss over the prior three months. As BTC then rebounded, the indicator surged to +41% in September, indicating that a large amount of supply moved back into profit within just a few weeks. Adler added that periods with a higher rate of change than the current level accounted for only about 4% of Bitcoin’s total trading days. Still, Adler said such a sharp recovery does not guarantee further gains. A meaningful part of the recent rise was driven by a mechanical price repricing tied to a short squeeze, Adler said, adding that it still needs to be confirmed whether sustained spot buying led the increase in supply returning to profit. Historically, when the 90-day rate of change climbed to extremely high levels, momentum often faded quickly and was followed by either a correction or sideways trading, Adler added.