98% of Bitcoin’s ‘Unspent Outputs’ Are Worth More Than When Made

A bitcoin on-chain metric has increased to three-year highs, suggesting a potential supply shortage and low odds of significant price pullback. While there are conflicting interpretations about this latest signal, many market observers are taking it to be positive for the cryptocurrency. 

The percentage of bitcoin unspent transaction outputs (UTXOs) in profit recently topped 98%, the highest level since December 2017, according to data source Coin Metrics. As well, the number of UTXOs in profit reached a record high of over 110 million. 

“A high percentage of UTXOs in profit potentially signals that there is relatively low sell pressure since there’s a low risk of capitulation. Conversely, it could signal that some investors may soon start taking profits if the potential gains become too good to pass up,” according to Coin Metrics’ “State of Network: Issue 76.”

A UTXO is leftover bitcoins after a transaction akin to receiving change after making a large cash payment. These coins can be spent as inputs to future transactions. A profit-making UTXO is the one whose price at the time of creation is less than the current market price.

Analysts expect the cryptocurrency to consolidate in the short-term before challenging the record high of $20,000 before the year-end.

“Most investors that have held steady for this long would continue to hold till new all-time highs, causing a supply shortage, and acting as a positive reinforcement loop, leading prices higher,” Connor Abendschein, research analyst at Digital Assets Data, told CoinDesk in an email.

Large spot buyers have already caused the drying up of sell-side liquidity, and the situation could intensify with the uptick in the percent of UTXOs in profit. 

At press time, the cryptocurrency is trading near $15,800, having reached a three-year high of $16,157 early Thursday.

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