Bitcoin price is still flat below its previous all-time high in five years. The shocking decline was one of the worst crypto winters ever recorded, 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 the bottom. lets take alook.
Six string indicators on the chain shouting: Bitcoin Bottom Inside
Bear markets are tough in Bitcoin or otherwise, because the bottom is only known in hindsight. The feeling that markets will be down forever, creates a fear that will freeze investors from buying at long-term lows.
Technical analysis is one of the tools that can be used to find oversold conditions or other signals that support the idea of a bottom. Unique to cryptocurrencies, it is a subset of quantitative fundamental analysis that focuses on on-chain signals. Many of these tools are likely to indicate a bottom.
Here we have Boyle’s doubling. Puell Multiple is calculated by dividing the value of the daily issue of bitcoins (in US dollars) by the 365-day moving average of the value of the daily issue.
Puell Multiple | Source: glassnode
Bitcoin Reserve Risk currently offers the most attractive risk/reward setting ever. Reserve risk is defined as the HODL price/bank. It is used to assess the long-term confidence of currency holders in relation to the price of the original currency at any given point in time.
Bitcoin Reserve Risk | Source: glassnode
In this chart, we have the MVRV Z-Score. The MVRV Z-Score is used to assess when a bitcoin is over/undervalued relative to its “fair value”.
MVRV Z-Score | Source: glassnode
The net realized losses are the largest ever. Realized Net Profit / Loss is the net profit or loss of all transferred currencies, and is determined by the Realized Profit-Loss difference.
Net Realized Profit/Loss | Source: glassnode
The ratio of realized earnings to value is also in the lower region. Realized Earnings to Value Ratio is defined as the ratio of Realized Earnings and Realized Value. This metric compares the market’s take profit with the total cost basis on a dollar-for-dollar basis.
Realized Profits-to-Value Ratio | Source: glassnode
Finally, the unrealized net gain/loss shows a capitulation. Interestingly, BTC never reached a state of euphoria and greed during the latest market peak. The data set has also become less volatile over time, as has the price of Bitcoin itself. The unrealized net profit/loss is the difference between the unrealized relative profit and the unrealized relative loss.
Net Unrealized Profit/Loss | Source: glassnode
While none of these signals confirm that a bottom is present in bitcoin’s price action, each instrument falls in an area that has historically been where previous bear markets ended. If the highest cryptocurrency by market capitalization is down here, it will be the smallest maximum drop in Bitcoin history.
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Featured image from iStockPhoto, Charts from TradingView.com
Originally published at San Jose News Bulletin
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