📊Quantifying How Much Stress Current Unrealized Losses and Profits Actually Represent in the Market. - "Unrealized Loss Stress Ratio (ULSR)" - "Unrealized Profit Stress Ratio (UPSR)" 1. Why Have "Supply-Based" Metrics Increased So Sharply in This Cycle? During this cycle, "supply-based" metrics such as Supply in Profit and Supply in Loss have risen to significantly higher levels than in previous cycles. There are several factors behind this, but one of the most important is the change in trading and settlement structures following the introduction of spot Bitcoin ETF. In particular, Supply in Loss has now reached historically high levels.(Figure 2) Looking at this metric alone, one could conclude “An enormous amount of Bitcoin is currently being held at a loss.” And that is true. However, there is an important limitation that must be considered when interpreting supply-based metrics. Supply in Loss tells us how much Bitcoin supply is currently held at a loss, but it does not distinguish how significant the actual loss Stress is for that supply. Even if a position is only $1 underwater, it is still included in Supply in Loss. In other words, Bitcoin carrying a $1 loss and Bitcoin carrying a $10,000 loss are both counted equally as supply in loss. Yet the financial stress represented by those two situations are fundamentally different. Therefore, rather than looking only at “How much supply is currently in loss?”, we also need a way to quantify: 2. “How much actual burden and stress do the losses currently embedded in the market represent?” To address this, @ForeDex_Global developed the "Unrealized Loss Stress Ratio" (ULSR).(Figure 1) "ULSR" divides Unrealized Loss by Realized Cap to quantify the relative stress represented by the unrealized losses currently accumulated across the market. Looking at previous cycles, major market bottoms tended to form when "ULSR" rose to approximately 45%. Today, however, "ULSR" stands at only around 21%. This creates a very interesting divergence. "Supply in Loss" is at historically high levels, yet the relative loss stress measured by "ULSR" remains significantly below the levels observed around major market bottoms in previous cycles. In other words, a historically large amount of Bitcoin may currently be held at a loss, but the relative stress represented by those losses has not yet reached the levels seen at previous major market bottoms. believes this is a particularly important distinction when interpreting the current market. 3. "Should We Also Remove the ETF Effect From ULSR?" To examine this, we also developed the "Adjusted Unrealized Loss Stress Ratio", which uses a Realized Cap that excludes ETF-related entities. The difference is significant. While "ULSR" currently stands at around 21%, the Adjusted Unrealized Loss Stress Ratio rises to approximately 30%. In other words, when unrealized loss stress is evaluated against a Realized Cap that excludes ETF-related entities, the market's relative unrealized loss stress appears considerably higher than what the traditional "ULSR" suggests. Even so, a reading of 30% remains below the stress levels observed around major market bottoms in previous cycles. 4. Unrealized Profit Stress Ratio (UPSR) Looking at the opposite side of the market profits rather than losses provides further insight into which framework may be more appropriate. During the previous bull cycle, "Unrealized Profit Stress Ratio"(UPSR) failed to reach the historical Euphoria Zone.(Figure 3) However, "Adjusted Unrealized Profit Stress Ratio", which excludes ETF-related entities from Realized Cap, clearly reached the Euphoria Zone.(Figure 4) This difference is important. If the ETF-adjusted metric produced signals at the peak of the previous bull cycle that were more consistent with historical cycles, then the same framework may also deserve greater attention when evaluating the bottom of the current bear cycle. For that reason, it may be important to monitor not only "ULSR", but also "Adjusted Unrealized Loss Stress Ratio" when assessing whether the market is approaching a major bottom. ✅Summary Ultimately, the point is not simply to create new indicators. If the market structure changes, the way data is generated also changes. And when the data changes, the framework used to interpret it must evolve as well. It has now been more than two years since spot "Bitcoin ETF" began. ETF have become a structural component of the Bitcoin market that can no longer be ignored. Rather than continuing to interpret existing metrics using the same historical thresholds, we need to identify which on-chain metrics are being affected by the post-ETF market structure and establish new analytical frameworks that reflect those changes. MVRV, ULSR, and UPSR are only the beginning. Similar structural changes may already be affecting many of the other on-chain metrics we have relied on for years.(mignolet)