On-chain analyst Willy Woo says one classic indicator is suggesting that now is an opportune time for bulls to position themselves for Bitcoin’s (BTC) next leg up. On the social media platform X, Woo looks at the Puell Multiple, which has often been used to call tops for Bitcoin. The Puell Multiple is a ratio […]
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Six tried and tested on-chain metrics are repeating patterns last seen at the bottom of the past three bear markets.
Several on-chain metrics from the Bitcoin (BTC) network are flashing buy signals following this year’s rally.
Bitcoin has broken out of its torpor to notch up a 37% gain since the beginning of 2023. However, on-chain data is still signaling it could be a “generational buying opportunity” according to analysts.
On Jan. 24, researcher and technical analyst “Game of Trades” identified six on-chain metrics for his 71,000 Twitter followers.
The first metric is an accumulation trend score highlighting zones of heavy accumulation in terms of entity size and the number of coins bought.
“Large entities have been in deep accumulation mode ever since the FTX collapse,” the analyst noted before adding “similar accumulation took place in the 2018 and 2020 bottoms.”
Bitcoin: 6 on-chain metrics calling for a generational long-term buying opportunity
— Game of Trades (@GameofTrades_) January 23, 2023
A thread
The Bitcoin entity-adjusted dormancy flow is a measure of the ratio of the current market capitalization and the annualized dormancy value.
Whenever dormancy value overtakes market capitalization, the market can be considered in full capitulation which has been a good historical buying zone.
According to Glassnode, this metric fell to its lowest-ever level in 2022.
Bitcoin’s reserve risk can be used to measure the confidence of long-term holders relative to the price of BTC. This also fell to its lowest-ever level at the end of 2022, according to Glassnode data.
Bitcoin’s Realized Price (RP) is the value of all coins in circulation at the price they last moved, in other words, an estimation of what the entire market paid for their coins.
According to Woo Charts, Bitcoin has been trading below this level since the FTX collapse until Jan. 13. It is currently just above the RP which represents another buying opportunity.
The Bitcoin MVRV Z-score shows when BTC is significantly over or undervalued relative to its ‘fair value’ or realized price. When the metric leaves the extremely undervalued zone it is often considered the end of the bear market.
Finally, there is the Puell Multiple examining the fundamentals of mining profitability and its impact on market cycles.
Lower values, as they are at the moment, indicate miner stress and represent long-term buying opportunities.
Related: Bitcoin halts volatility at $23K as BTC hodlers see mass return to profit
The analyst concluded these six on-chain metrics are “pointing towards an exceptional risk-reward setup in Bitcoin.”
The metrics are all at similar levels to market cycle bottoms in 2015, 2018, and 2020, they added.
BTC is currently trading down over 1.9% over the past 24 hours at $22,675, according to Cointelegraph data.
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Bitcoin has historically profited from Puell Multiple lift-offs, but unique macro conditions mean what happens next is uncertain.
Bitcoin (BTC) is enjoying what some are calling a "bear market rally" and has gained 20% in July, but price action is still confusing analysts.
As the July monthly close approaches, the Puell Multiple has left its bottom zone, leading to hopes that the worst of the losses may be in the past.
The Puell Multiple one of the best-known on-chain Bitcoin metrics. It measures the value of mined bitcoins on a given day compared to the value of those mined in the past 365 days.
The resulting multiple is used to determine whether a day's mined coins is particularly high or low relative to the year's average. From that, miner profitability can be inferred, along with more general conclusions about how overbought or oversold the market is.
After hitting levels which traditionally accompany macro price bottoms, the Puell Multiple is now aiming higher — something traditionally seen at the start of macro price uptrends.
"Based on historical data, the breakout from this zone was accompanied by gaining bullish momentum in the price chart," Grizzly, a contributor at on-chain analytics platform CryptoQuant, wrote in one of the firm's "Quicktake" market updates on July 25.
The Multiple is not the only signal flashing green in current conditions. As Cointelegraph reported, accumulation trends among hodlers are also suggesting that the macro bottom is already in.
After its surprise relief bounce in the second half of this month, Bitcoin is now near its highest levels in six weeks and far from a new macro low.
Related: Bitcoin futures data shows 'improving' mood' despite -31% GBTC premium
As sentiment exits the "fear" zone, market watchers are pointing to unique phenomena which continue to make the 2022 bear market extremely difficult to predict with any certainty.
In another of its recent "Quicktake" research pieces, CryptoQuant noted that even price trendlines are not acting as normal this time around.
In particular, BTC/USD has crisscrossed its realized price level several times in recent weeks, something which did not occur in prior bear markets.
Realized price is the average at which the BTC supply last moved, and currently sits just below $22,000.
"The Realized Price has signaled the market bottoms in previous cycles," CryptoQuant explained.
"More importantly, the bitcoin price did not cross the Realized Price threshold during the last two periods (134 days in 2018 and 7 days in 2020). Yet, since June 13, it crossed back and forth this level three times, which shows the uniqueness of this cycle due to unprecedented macroeconomic conditions."
Those conditions, as Cointelegraph reported, have come in the form of forty-year highs in inflation in the United States, rampant rate hikes by the Federal Reserve and most recently signals that the U.S. economy has entered a recession.
In addition to realized price, meanwhile, Bitcoin has formed an unusual relationship to its 200-week moving average (MA) this bear market.
While normally retaining it as support with brief dips below, BTC/USD managed to flip the 200-week MA to resistance for the first time in 2022. It currently sits at around $22,800, data from Cointelegraph Markets Pro and TradingView shows.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bitcoin's upside prospects are supported by at least three on-chain and technical metrics.
Bitcoin (BTC) could be in the process of bottoming after gaining 25%, based on several market signals.
BTC's price has rallied roughly 25% after dropping to around $17,500 on June 18. The upside retrace came after a 75% correction when measured from its November 2021 high of $69,000.
The recovery seems modest, however, and carries bearish continuation risks due to prevailing macroeconomic headwinds (rate hike, inflation, etc.) and the collapse of many high-profile crypto firms such as Three Arrows Capital, Terra and others.
But some widely-tracked indicators paint a different scenario, suggesting that Bitcoin's downside prospects from current price levels are minimal.
The first sign of Bitcoin's macro bottom comes from its weekly relative strength index (RSI).
Notably, BTC's weekly RSI became "oversold" after dropping below 30 in the week of June 13. That is the first time the RSI has slipped into the oversold region since December 2018. Interestingly, Bitcoin had ended its bear market rally in the same month and rallied over 340% in the next six months to $14,000.
In another instance, Bitcoin's weekly RSI dropped toward 30 (if not below) in the week beginning March 9. That also coincided with BTC's price bottoming below $4,000 and thereafter rallying to $69,000 by November 2021, as shown below.
Bitcoin price has rebounded similarly since June 18, opening the door to potentially repeat its history of parabolic rallies after an "oversold" RSI signal.
Another sign of a potential Bitcoin macro bottom comes from its net unrealized profit and loss (NUPL) indicator.
NUPL is the difference between market cap and realized cap divided by market cap. It is represented as a ratio, wherein a reading above zero means investors are in profit. The higher the number, the more investors are in profit.
Related: Bitcoin must close above $21.9K to avoid fresh BTC price crash — trader
On July 21, Bitcoin NUPL climbed above zero when the price wobbled around $22,000. Historically, such a flip has followed up with major BTC price rallies. The chart below illustrates the same.
The third sign of Bitcoin forming a macro bottom comes from another on-chain indicator called the Puell Multiple.
The Puell Multiple examines mining profitability and its impact of market prices. The indicator does it by measuring a ratio of daily coin issuance (in USD) and the 365 moving average of daily coin issuance (in USD).
A strong Puell Multiple reading shows that mining profitability is high compared to the yearly average, suggesting miners would liquidate their Bitcoin treasury to maximize revenue. As a result, a higher Puell Multiple is known for coinciding with macro tops.
Conversely, a lower Puell Multiple reading means the miners' current profitability is below the yearly average.
Thus, rigs with break-even or below-zero revenue from mining Bitcoin will risk shutting down, giving up market share to more competitive miners. The ousting of weaker miners from the Bitcoin network has historically reduced selling pressure.
Interestingly, the Puelle Multiple reading as of July 25 is in the green box and similar to levels observed during the March 2020 crash, 2018 and 2015 price bottoms.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The Puell Multiple bounces from its latest rare trip into the "buy" zone, and previously, BTC/USD has subsequently put in a macro bottom.
A classic Bitcoin (BTC) on-chain indicator has seen a “hell of a bounce” even as price action stays uncertain.
In a tweet on July 9, Philip Swift, creator of analytics resource Look Into Bitcoin, highlighted a dramatic change of course for the Puell Multiple.
A deceptively simple metric, Puell tracks miner behavior with a view to understanding Bitcoin market extremes.
It has served extremely well as an indicator of when BTC price tops and bottoms are likely due, and in late June dipped into its green “buy” zone for only the fifth time in history.
Thanks in part to last weekend’s record difficulty readjustment, Swift says, Puell has now reversed upwards — and if it keeps going, higher prices should logically follow.
“Hell of a bounce out of the green zone this week for the Puell Multiple,” he summarized.
“Largely down to the difficulty adjustment and increase in hashrate. Will be a good sign if we see this and hashrate continue to climb quickly as bitcoin miners come back onboard.”
As Cointelegraph reported, miners returning to work after being displaced from China will create more competition and boost the Bitcoin hash rate, with difficulty climbing once again to account for the changes.
Estimates vary greatly as to when the turbulence impacting mining will be truly over.
A reversal for Puell meanwhile could herald a definitive macro Bitcoin price floor. As trader and analyst Rekt Capital recently observed, dips into the green zone tend to be followed soon afterwards by a BTC/USD bottom.
The trip into the green itself occurs while Bitcoin is still preparing to put the bottom in, and does not completely line up with price behavior.
Bitcoin price action is seeing strength as the weekend progresses, something which could nonetheless result in a reversal in line with recent short-term trends.
Related: BTC price regains $33k as Square confirms 'mainstream' Bitcoin wallet plans
The upcoming Grayscale unlocking events remain a topic of conversation, but opinions differ as to whether BTC/USD will be affected.
"This topic is the next big narrative," trader Michaël van de Poppe said in an update on Saturday, putting it alongside topics such as Bitcoin options expiries.
He added that negative bias is already active across crypto markets, which may give undue credence to the unlocking as a threat to price stability.
Whale selling pressure is too great to preserve the bull market for now, one warning says, while similarities to 2017 provide a silver lining for hodlers.
Bitcoin (BTC) is "confirming" a bear market because whales are still sending large amounts of BTC to exchanges.
That's according to Ki Young Ju, CEO of on-chain analytics service CryptoQuant, who on June 21 warned over the "very uncertain" current state of Bitcoin.
Uploading a chart of the so-called "Whale Capitulation Index," Ki identified the first major spate of whale selling on exchanges since July 2019.
At that time, BTC/USD had just come off a run to $13,900 — a level it would not reach again until October 2020.
As such, given this historical context, Ki joined the voices arguing that the recent $64,500 all-time high for Bitcoin could well have been a local top.
"I hate to say this, but it seems like the $BTC bear market confirmed," he wrote in comments.
"Too many whales are sending $BTC to exchanges."
The data caught the attention of statistician Willy Woo, who this week noted that hodlers were once more adding to their positions, dredging up the supply at price levels just above $30,000.
A request for data on whales' behavior during 2017 yielded a chart showing three distinct episodes of coins being sent to exchanges en masse. This, as the Twitter user who provided it highlighted, did not stop BTC/USD hitting its then all-time high of $20,000 by the end of the year.
Continuing, Ki himself acknowledged that it may not pay to stay bearish on Bitcoin beyond the short term.
"To be clear, I expect my $BTC bearish bias won't last long (maybe just a few weeks) because the market looks good in terms of supply/demand in the long term (e.g., Stablecoins ratio(USD) and SSR)," he added.
So don't get me wrong, I'm not saying it's over."
As Cointelegraph reported, a host of factors appears to be contributing to downward price pressure on Bitcoin.
Related: Classic bearish chart pattern forms for Bitcoin as BTC price tumbles to $32K
Most notable of all is arguably the seismic shift among miners after China launched a crackdown which halted activities in some of what were previously the most intensive mining regions worldwide.
Commentators have called the event, which is already seeing hashing power transfer to other countries, as the biggest "attack" that the network has ever witnessed.
The network hash rate has declined considerably, but not by more than 40% from its all-time highs, while price action has retained $30,000 support.
CryptoQuant eyed a corresponding drop in Bitcoin's Puell Multiple, a classic indicator which now puts the largest cryptocurrency closer to "buy" territory.
