On-Chain Metrics Indicate Market Bottoms, But Macro Environment Remains Uncertain

Key Points:

• According to IntoTheBlock, while on-chain metrics suggest a bear market bottom for crypto assets, the larger macro situation remains uncertain.
• 50% of Bitcoin holders are already underwater, as was the case the past several times Bitcoin reached its bear market bottom.

According to market intelligence firm IntoTheBlock, while on-chain metrics suggest a bear market bottom for crypto assets, the larger macro situation remains uncertain.

The crypto analytics firm discovers in a new piece that the number of long-term Bitcoin (BTC) holders, or traders who have owned BTC for at least a year, grew in 2022, adding that the investment class is known for acquiring the king crypto during weak markets and setting a support level.

In 2022 we saw the amount of Bitcoin owned by addresses holding for over one year (‘hodlers’) increase by 50% from 10 million BTC to 15 million BTC. This pattern has been observed in previous bear markets, with hodlers’ balance decreasing only after new highs are set.

The report indicated that 50% of Bitcoin holders are already underwater, as was the case the past several times Bitcoin reached its bear market bottom.

Previous bear markets have bottomed after getting to the point where 50% or more of the holders are losing money on their positions, classified as ‘out of the money’ by IntoTheBlock.

Bitcoin is now trading at $22,860 at the time of writing, representing a roughly 0.3% increase in the previous 24 hours.

According to IntoTheBlock, after the failure of the big crypto exchange, FTX led their courses to diverge, equities and cryptocurrencies, notably BTC, have resumed correlating.

However, the business warns that, while present conditions mimic previous bear market situations, it is difficult to predict what lies ahead for Bitcoin.

• The correlation coefficient between the Nasdaq and Bitcoin is back up to 0.86 currently, suggesting a very strong statistical relationship between the two.
• As inflation has come down, markets broadly have climbed in anticipation of a potential Fed pivot.
• Although there still is no confirmation from the Fed looking to ease financial conditions, investors may be front-running the decision given that they have learned the playbook on how “printing money” leads financial assets to appreciate.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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