Bitcoin Traders Profit Margins Jump 40% in May, but Network Activity Lags

Bitcoin traders have seen a significant rebound in their profit margins, with the Profit/Loss Margin for short-term holders jumping from -19% in April to +21% in May. This shift indicates a renewed sense of optimism among traders following weeks of market correction. The Realized Price for the 1–3 month cohort has stabilized at $84,600, further supporting the accumulation sentiment. At the time of reporting, Bitcoin was trading at $103,447, marking a slight increase of 0.03% in the last 24 hours. The 30-day Moving Average of the Profit/Loss Margin currently stands at +9%, which is well below the overheated threshold of +40%. This suggests that there is still room for further gains without triggering aggressive profit-taking.

However, not all indicators align with this price recovery. The Network Value to Transaction (NVT) Ratio has climbed by nearly 70% to 52.81. This sharp rise implies that Bitcoin’s market capitalization is growing faster than the actual transferred volume on-chain. While this can reflect bullish valuation expansion, it often precedes local tops when not supported by active network usage. Therefore, the current spike raises early caution, especially if the growth remains detached from transaction throughput.

In fact, network usage has failed to keep up with the price rally. Bitcoin’s Stock-to-Flow Ratio has dropped by 16.66% to 1.0595 million, reflecting reduced scarcity pressure. This decline could be due to shifting miner behavior or a slowdown in accumulation from long-term holders. When the stock-to-flow ratio trends lower, newly mined BTC typically enters circulation faster, potentially creating mid-term supply pressure if demand doesn’t rise in tandem.

Despite Bitcoin rallying to over $103K, the Daily Active Address (DAA) Divergence remains deeply negative at -241.32%. This indicates a major disconnect between price action and user activity, as fewer unique addresses are interacting with the network relative to its rising valuation. Historically, such steep negative divergence signals weakening on-chain fundamentals behind price moves. Additionally, the transaction count and network growth have dropped sharply to 67.2K and 52.9K, respectively. This cool-off in usage signals hesitation from both new and existing participants, an unusual backdrop for a sustained rally. A healthy rally typically aligns with increased user adoption and transaction throughput. However, this recent decline contradicts price momentum and suggests the rally may lack strong fundamental support.

Looking at derivatives, the Long/Short Ratio has fallen to 0.9964, with longs making up 49.91% and shorts ticking up to 50.09%. This near-equal distribution reveals increasing uncertainty in trader expectations. The sharp shift from a previously long-heavy bias highlights growing caution after Bitcoin’s recent price surge.

The current market outlook presents a conflicting narrative. On one hand, Bitcoin’s recovery in trader profit margins and sustained price strength suggests bullish momentum. On the other hand, a sharp rise in valuation is not being matched by growth in transaction activity, user engagement, or network expansion. This disconnect raises concerns about the sustainability of the rally. For the upward trend to continue in a healthy manner, fundamental on-chain metrics must improve.