Has Bitcoin Bottomed Or Not? Let’s Take A Look At The On-Chain Metrics

The bull market euphoria that sent prices to new highs throughout 2021 is now giving way to gloom for anyone who has bought Bitcoin since January 1, 2021. Data from Glassnode shows that these buyers are “losing” and the market is gearing up for the eventual capitulation.

NUPL (which is a measure of the network’s overall unrealized profit and loss as a percentage of market capitalization) indicates that “less than 25% of the market cap is profitable, which resembles the structure of the early stage goods in previous bear markets”.

Based on prior capitulation events, if a similar move occurs at current levels, Bitcoin price could drop to the $20,560 to $25,700 range in a “full capitulation scenario.”

With the crypto space clearly trading in bear territory, most people are wondering: “Where is the bottom?”

One metric that can be useful for providing an answer is the Mayer Multiple – an oscillator that tracks the ratio between price and a 200-day moving average.

In previous bear markets, “oversold or undervalued conditions coincided with the Mayer Multiple falling to the 0.6–0.8 range” according to Glassnode, and that is exactly the range Bitcoin is currently finding.

Observing historical data, Bitcoin’s recent trading range of $25,200 to $33,700 aligns with phase B of previous bear market cycles and could mark BTC’s lows in the current cycle.

Bitcoin’s real price model also provides insight into potential bottoms. According to Bitcoin data provider LookIntoBitcoin, the figures currently show the real price of BTC at $23,601 as of June 5.

Combining these two metrics suggests a possible BTC low in the $23,600 to $25,200 range.

Selling activity in the current market conditions is largely driven by short-term holders, similar to the behavior seen in the previous two extended bear markets. At that time, long-term holders holding more than 90% of the supply are profitable in the market.

The recent price drop below $30,000 has seen the percentage supply spike above 90% for long-term holders, indicating that short-term holders have “essentially reached a pain threshold near the top.”

According to Glassnode, miners have also been net sellers in recent months as falling prices shrink their profits, resulting in “the total balance of miners falling to about 5,000 to 8,000 BTC per month.”

If the price of BTC continues to fall from here, the possibility of more miners capitulating is not unexpected, as historically demonstrated by the Puell Multiple – which is the ratio of the daily BTC issuance value to the median line 365-day moving average of this value.

Historical data shows that the index fell below 0.5 during the last stages of previous bear markets, and this has yet to happen in the current cycle. Based on current market conditions, a further 10% drop in BTC price could lead to an eventual miner capitulation event, similar to previous bear market declines and selling peaks.

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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