Definition. This chart shows the total volume of Realized Profit (green columns, +ve) and Realized Loss (red columns, -ve) each day, together with a smoothed net trace (black line). These metrics, and their relative scale, can be used to better understand market cycles and investor sentiment.

Technical. A realized profit occurs where a coin is spent at a price above its acquisition (pricestamped) price, and a realized loss where it is spent below it. The net trace is smoothed:

• Net Realized Profit/Loss (7D-EMA) = ema(Realized Profit - Realized Loss, 7)

Interpretation.

• Higher Values ↗️ signify a greater volume of Profit, or Loss, is 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.

• The Net Realized Profit/Loss trace takes the difference between Realized Profit and Realized Loss to observe the net daily 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. Built from Realized Profit and Realized Loss. See also the coin-denominated Realized Profit and Loss [Native] and the long-horizon Yearly Realized Profit/Loss.