Bitcoin price remains below its previous record high of five years ago. The shocking drop has been one of the worst crypto winters on record and the market is bracing for an ongoing meltdown.
However, a series of on-chain indicators in BTC could provide clues as to how close we are to a bottom. Let’s see.
A Series of Six On-Chain Indicators Shout: Bitcoin Bottom Is In
bear markets are brutal in Bitcoin or otherwise, because the bottom is only known afterwards. The sense that markets will fall forever creates a fear that keeps investors from buying long-term lows.
Technical analysis is a tool that can be used to find oversold conditions or other signals that support the idea of a bottom. Unique to cryptocurrencies is a subset of quantitative fundamental analysis that focuses on on-chain signals. Several such tools may suggest that there is a bottom.
Here we have the Puell Multiple. The Puell Multiple is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of the daily issuance value.
Puell Multiple | Source: glassnode
Bitcoin Reserve Risk is currently showing the most attractive risk/reward setup ever. Reserve risk is defined as price / HODL Bank. It is used to assess the long-term confidence of holders against the price of the native currency at any given time.
Bitcoin Reserve Risk | Source: glassnode
In this graph we have the MVRV Z score. The MVRV Z-Score is used to assess when Bitcoin is over/undervalued relative to its “fair value”.
MVRV Z-Score | Source: glassnode
Net realized losses are the largest ever. Net realized gain/loss is the net gain or loss of all the coins moved and is determined by the difference between realized gain and realized loss.
Net Realized Profit/Loss | Source: glassnode
The realized earnings-to-value ratio is also in the lower zone. Realized earnings-to-value ratio is defined as the ratio between realized earnings and realized cap. This metric compares profit-taking in the market to the total cost basis on a dollar-to-dollar basis.
Realized Profits-to-Value Ratio | Source: glassnode
Finally, the net unrealized profit/loss shows capitulation. Interestingly enough, BTC never reached a state of euphoria and greed during the last market top. The data set also becomes less volatile over time, as does the Bitcoin price itself. Net unrealized gain/loss is the difference between relative unrealized gain and relative unrealized loss.
Net Unrealized Profit/Loss | Source: glassnode
While none of these signals confirm that the bottom for Bitcoin price action has been reached, each tool is in a zone historically where previous bear markets ended. Should the top cryptocurrency by market cap be the bottom here, it would be the smallest maximum withdrawal in Bitcoin history.
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Featured image from iStockPhoto, Charts from TradingView.com
