Bitcoin’s “Supply in Profit” Warning, Could a Downtrend Be Starting?

A popular on-chain analyst has sounded a fresh warning for Bitcoin (BTC) traders: the fraction of BTC currently held “in profit” may be rolling over, a development that, if confirmed, could mark the start of a short-to-medium-term downtrend.

On X (formerly Twitter), analyst Ali Martinez flagged a Glassnode chart showing Supply in Profit, the amount of Bitcoin last moved at a price below today’s level, beginning to deteriorate. Martinez wrote that the metric “signals a possible shift into a downtrend phase,” a line that quickly spread through crypto social feeds and was picked up by market commentators.

Bitcoin is trading near $113,000 as markets opened Thursday, after a choppy week that saw BTC purple around six figures and briefly test higher levels earlier in August. That puts the spot market a few thousand dollars below levels many technical traders are watching.

Martinez and others have repeatedly cited $118,000 as an important pivot, a reclaim above it would keep the bulls in charge, while failure to retake that area increases the odds of a deeper pullback. Analysts have also pointed to roughly $109,000 as immediate support; a break below that would amplify bearish pressure.

What “Supply in Profit” Means

Glassnode’s Supply in Profit metric simply counts coins whose last on-chain move occurred at a price lower than the current market price, in other words, coins that would be in the green if sold today. Historically, when a very large percentage of supply sits in profit (and especially when that share begins to fall), it can precede corrective phases because holders become more tempted to take gains and liquidity conditions change.

Glassnode’s own documentation lays out the metric and its use as an early warning for shifts in market sentiment. Martinez’s chart shows the net position change for profitable supply has turned negative after a long stretch of gains, a pattern seen near prior cycle peaks. Traders on X and Telegram are treating that signal as a caution flag: one data point, the thinking goes, but one worth respecting given how crowded positioning can become when the bulk of supply is unrealized profit.

The technical and on-chain warning arrives amid a backdrop of big institutional flows and macro chatter. Spot Bitcoin ETFs have continued to swing money in and out, some days showing brisk inflows, other sessions showing outflows, and analysts say that when large institutions reduce exposure, it can amplify price moves.

Recent reporting shows meaningful ETF activity this month, and some days of redemptions have coincided with volatile price action. That adds a structural source of liquidity that can push BTC lower if institutions begin net selling.

At the same time, broader macro discussion over interest rates and geopolitical headlines continues to set the risk tone for crypto. Market commentary this week suggested traders were keeping an eye on central bank signals and headline risk that could translate into quick shifts in risk appetite for assets like Bitcoin.

Market participants are essentially debating two immediate scenarios. BTC cools toward the $109k area (or the next support band below) while on-chain profit metrics settle. If buying reappears at support, the uptrend resumes and the recent dip is digested as a healthy consolidation.

If supply in profit continues to roll over and ETF flows flip meaningfully negative, the market could experience a deeper drawdown that forces long holders to reduce positions, a pattern consistent with past cycle corrections when unrealized profit shares fell rapidly.