How Bitcoin On-Chain Signals Present A Solid Case For A Market Bottom
October 19 2022 - 9:51AM
NEWSBTC
Bitcoin price remains stuck below its former all-time high set five
years ago. The shocking decline has been one of the worst crypto
winters on record, and the market is bracing for continued
meltdown. However, a series of on-chain indicators in BTC could
provide clues to how close we are to a bottom. Let’s take a look. 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 in hindsight. The feeling that markets will fall
forever, creates a fear that freezes investors from buying at
long-term lows. Technical analysis is one 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 are potentially suggesting a bottom is in. 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 daily issuance value. Puell Multiple | Source: glassnode
Bitcoin Reserve Risk is currently demonstrating the most attractive
risk/reward setup ever. Reserve Risk is defined as price / HODL
Bank. It is used to assess the confidence of long-term holders
relative to the price of the native coin at any given point in
time. Bitcoin Reserve Risk | Source: glassnode In this chart, we
have 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 Profit/Loss is the net profit or loss of all moved coins,
and is defined by the difference of Realized Profit – Realized
Loss. Net Realized Profit/Loss | Source: glassnode
The Realized Profits-to-Value Ratio is also in the bottom
zone. The Realized Profits-to-Value Ratio is defined as the ratio
of Realized Profits and Realized Cap. This metric compares
profit-taking in the market with its overall cost basis on a
dollar-to-dollar basis. Realized Profits-to-Value Ratio | Source:
glassnode Finally, Net Unrealized Profit/Loss shows capitulation.
Interestingly, BTC never quite reached a state of euphoria and
greed during the last market top. The dataset is also becoming less
volatile over time, much like Bitcoin price itself. Net Unrealized
Profit/Loss is the difference between Relative Unrealized Profit
and Relative Unrealized Loss. Net Unrealized Profit/Loss | Source:
glassnode While none of these signals confirm the bottom is in for
Bitcoin price action, each tool is in a zone that historically has
been where past bear markets ended. Should the top cryptocurrency
by market cap bottom here, it would be the smallest maximum
drawdown in Bitcoin history. Follow @TonySpilotroBTC on Twitter or
join the TonyTradesBTC Telegram for exclusive daily market
insights and technical analysis education. Please note: Content
is educational and should not be considered investment
advice. Featured image from iStockPhoto, Charts from
TradingView.com
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