Realized Profit Ratio

Definition ∞ Realized Profit Ratio measures the proportion of profits taken by investors relative to losses. This on-chain metric compares the total value of realized gains to the total value of realized losses for a given cryptocurrency over a specific period. It indicates whether the market is predominantly taking profits or incurring losses, reflecting overall investor sentiment and market health. A high ratio suggests significant profit-taking, which can precede a market correction, while a low ratio might indicate capitulation.
Context ∞ The Realized Profit Ratio is a valuable on-chain indicator often featured in crypto news to assess market sentiment and predict potential price reversals. Analysts frequently use it to determine if a market is overheating or experiencing capitulation, providing context for investor behavior. Monitoring this ratio helps identify periods of extreme greed or fear among market participants.