Definition. This chart shows the 7-day sum of Long-Term Holder Realized Profit (+ve, green columns) and Realized Loss (-ve, red columns), normalized by price to re-denominate the values in BTC terms, together with the Net Realized Profit/Loss (7D-EMA, blue line) and price (grey).

Technical. Both components use the entity-adjusted (account-based) LTH realized profit and loss metrics:

• Relative 7-day LTH Realized Profit [BTC] = sum(LTH Realized Profit, 7) / Price (green)
• Relative 7-day LTH Realized Loss [BTC] = -1 x sum(LTH Realized Loss, 7) / Price (red)
• Net Relative Realized P/L = ema(Profit + Loss, 7) (blue)

Denominating in BTC removes the effect of a rising USD price, making realization volumes comparable across cycles.

Interpretation. These metrics, and their relative scale, can be used to better understand Bitcoin market cycles and investor sentiment:

• Higher Values ↗️ signify a greater volume of Profit, or Loss realized that day, usually peaking at market tops, and bottoms respectively.

• Lower Values ↘️ signify a relatively quiet period, often associated with longer-term price consolidation.

• Realized Profits 🟢 tend to dominate during bull markets, as investors who accumulated at cheaper prices, spend coins into market strength.

• Realized Losses 🔴 tend to dominate during bear markets, as investors who bought coins at higher prices, spend and exit at a loss, often peaking during capitulation events.

• Net Realized Profit/Loss 🔵 takes the difference between Realized Profit and Realized Loss to observe the net change in capital flows in/out of the asset.

💡 Hint: The transition between a bull and a bear market trend can often be identified, in part, by whether the volume of Realized Profits exceeds Realized Losses, and vice versa.

Notes. This video guide prepared by Glassnode is available to better understand the relationship between Realized Profit/Loss and Bitcoin market cycles. The USD-denominated view is Long-Term Holder Net Realized Profit / Loss, and the Short-Term Holder counterpart is Relative Short-Term Holder Realized Profit and Loss [BTC]. Built from LTH Realized Profit and LTH Realized Loss.