Bitcoin is starting to show the first clear sign of a deeper market clean-up.

The Bitcoin UTXO Block P/L Count Ratio Model compares the amount of UTXO blocks sitting in profit versus those sitting in loss. In simple terms, it measures how broad the market’s profit base is beneath price.

When the ratio is high, most UTXO blocks remain in profit. That usually reflects a market still carrying a large amount of unrealized gains, which also means higher distribution risk. When the ratio collapses toward the lower range, the opposite happens: profitability compresses, losses become more widespread, and the market starts moving into a more advanced reset phase.

That is what makes the current reading important.

The ratio has now dropped into a zone that has historically appeared during bottoming processes, but does not mean the bottom is already in.

For a stronger bottoming signal, the 365-day moving average still needs to fall much more aggressively. That would indicate that the long-term profit structure of the market is being properly reset, rather than simply producing a short-term oversold reading.

In other words, Bitcoin may need more pain before it can fully end this bearish phase.

Short squeezes and temporary upside moves can still happen, especially if leveraged shorts become overcrowded. But those rallies should not be confused with a structural recovery unless the broader profit/loss ratio begins to rebuild sustainably.

The main takeaway is that BTC is finally showing evidence of a meaningful internal clean-up. But if history is a guide, the market may still need to absorb more stress before the bearish phase can fully exhaust itself.

Written by MorenoDV_