The outlook for the crypto market continues to improve as Bitcoin price builds a spectacular upside momentum. The BTC price managed to hold onto recent gains and hit a high of $21,438 on January 17, first time since the collapse of FTX.
However, Bitcoin price is mostly trading in a range for the last few days, causing investors to speculate whether the BTC price has actually bottomed out or there’s still a downfall left.
On-Chain Data to Identify Bitcoin Bottom
According to on-chain analysis platform Glassnode, investors can rely on 10 on-chain indicators to identify a bottom for Bitcoin during bear markets.
An intersection between Realized Price x 0.7 and the 200D-SMA x 0.6 (Mayer Multiple) pricing models helped indicate a Bitcoin market bottom historically. Currently, the indicator fully confirmed that the Bitcoin has bottomed.
Market recovery is accompanied by a rise in the number of unique addresses, which shows an increase in demand. Comparing the monthly average against the yearly average of addresses helps identify relative shifts in momentum. A continuous rise for at least two months is considered an indicator of an upcoming price rally.
Moreover, an uptick in Miner Revenue sourced from Fees shows growing network demand. Generally, the miner fee revenue momentum indicator confirms a shift in Bitcoin cycle as miners’ profit from bitcoin production continues to rise. Currently, on-chain data confirms the regime shifts in network utilization and demand.
Forth indicator, the Relative Activity of Small and Large Entities is considered one of the easy and most used indicators by investors to identify Bitcoin price changes. The rise in whale activity generally denotes a rise in the price, but whale accumulation is missing currently.
The Realized Profit/Loss Ratio is also one of the most powerful tools in on-chain analysis. It provides an oscillator tracking whether the aggregate volume of realized profits exceed the volume of realized losses or realized profits. If the 30D-SMA of the Realized P/L Ratio recovers back above 1.0, it will indicate Bitcoin market bottom. At present, the indicator is not triggered.
Another similar network profitability model Adjusted Output Profit Ratio (aSOPR) is a popular tool among on-chain analysts to identify price changes in the short-term. aSOPR is quite responsive to macro changes in market sentiment as well as whales activity. This indicator is also not triggered as realized losses still dominates.
Short-Term Holder Confidence Indicator is also not triggered yet as the confidence of newer investors has not reached that level, but it is slowly rising.
Does This Bitcoin Price Rally Indicate Cycle Change?
The bear market witnessed heavy Bitcoin supply redistribution. Bitcoin moved from Long-Term Holders to new small investors as Bitcoin price dropped below $20K. The Long-term to Short-term supply profitability indicator confirms Bitcoin bottom conditions.
Ninth indicator, Bitcoin Cycle Change Detection also confirms that the Bitcoin price has bottomed out as seller exhaustion may have been reached.
Moreover, the Supply Stress Ratio indicates the bear market is ending as financial pain for investors seems to subdue amid the recent Bitcoin price rally this month. A fall in Supply Stress below 1.0 will confirm a Bitcoin bear market end.
Thus, four out of 10 indicators confirm the market bottom, while two indicators show as “In Progress.” And, four crucial indicators are yet to confirm that the Bitcoin price has bottomed.
Also Read: What To Do During A Bitcoin Bear Market? – 5 Things You Should Know