Excluding bitcoin that has not moved for more than 10 years, the share of bitcoin supply in profit has held at around 60% since August, data showed.

CoinPost, a blockchain media outlet, reported on Oct. 7 that Darkfost, an analyst at on-chain analytics firm CryptoQuant, assessed that on this basis the bitcoin market is still far from overheating over the medium to long term.

The key to the analysis is that it reassessed the market after excluding long-dormant supply from the calculation. Darkfost said bitcoin that has not moved even once for more than 10 years should be viewed as illiquid supply that almost never comes to market even if it carries large unrealised gains. Some of it may already be lost, he added. He said excluding such coins allows a "more realistic" view of market conditions.

Applying this benchmark, a significant share of current bitcoin supply has moved back into unrealised profit territory. Still, Darkfost said it is difficult to argue the market is overheated based on this figure alone. He said the market remains "far from overheating" from a medium- to long-term perspective. The point is that the market’s resilience should not be overstated by including supply that has been locked up for a long time, even as the amount in profit increases.

What market participants are watching is the decision of investors who have held bitcoin for nearly a year. Darkfost said the current price zone is one that forces a decision for them. He said it is time to decide whether to keep holding, take profits, or sell at a level that limits losses.

He also raised the possibility that the current price may move for a while without a clear direction. Darkfost said it is "not unreasonable" for bitcoin to continue moving sideways at the current level. He said a range-bound trend could persist for now if supply and demand do not tilt sharply toward either buying or selling.

The analysis concluded that the next direction depends on the tug of war between supply and demand. Excluding long-dormant supply allows a more conservative view of effective circulating supply and profit conditions, and under such conditions it is hard to conclude medium- to long-term overheating based on a short-term surge alone. Bitcoin was trading in the $84,000 range as of Oct. 7, and whether long-term holders sell and how actual circulating supply changes are expected to be key variables for the time being.