Profit Dominance

Definition ∞ Profit dominance describes a market condition where a disproportionately large share of an asset’s circulating supply is held by entities currently in a profitable position. This means their acquisition cost was below the current market price. This metric indicates the extent to which investors are holding unrealized gains. A high degree of profit dominance can suggest potential future selling pressure if these holders decide to liquidate. It reflects widespread unrealized gains.
Context ∞ In cryptocurrency analysis, profit dominance is a key on-chain metric often reported in crypto news to gauge market sentiment and potential supply dynamics. A high percentage of coins in profit might indicate a healthy market, but it also signals a risk of profit-taking events. Analysts observe changes in profit dominance to forecast potential market corrections or sustained upward movements, providing insight into investor conviction.