Markets
Has Bitcoin Price Bottomed? 4 crucial signals in the chain
In the crypto ecosystem, identifying the exact moment when Bitcoin (BTC) prices reach their lowest point is akin to finding a needle in a haystack. Recent data, however, provides some insight into whether Bitcoin’s price has bottomed.
As the digital currency hit a one-month low of $58,500, analysts at CryptoQuant and Glassnode revealed four crucial on-chain indicators to watch. These indicators can be useful for analyzing market behaviors near low points and understanding the conditions necessary for prices to recover and rise again.
1. Monitoring the growth of demand for Bitcoin
The first quarter of 2024 saw a notable increase in demand for Bitcoin, coinciding with the launch of US spot ETFs, setting record highs. However, after May, this demand registered a significant slowdown.
It is vital to observe demand from permanent incumbents to determine whether Bitcoin has hit rock bottom. Permanent holders are now purchasing at a rate of 72,000 Bitcoins per month.
However, demand is significantly lower than at the beginning of 2024. Returning to these levels is essential for a sustainable price recovery.
See more information: Bitcoin (BTC) Price Prediction 2024/2025/2030
Bitcoin demand from permanent holders. Source: CriptoQuant
In addition to the demand side, Glassnode’s analysis reveals significant insights into the behavior of long-term holders (LTHs), who also play a crucial role on the supply side. LTHs typically distribute coins and take profits during bull markets, helping to establish market cycle tops.
Currently, the market is witnessing a regime where divestment in LTH is moderate. This indicates a movement towards equilibrium rather than euphoria, which is a phase in which unrealized LTH profits are greater than 250%. High profits motivate LTHs to sell BTC aggressively, marking the top of the market.
The current balancing phase suggests that although LTH is not yet ready to massively sell its assets, it is also not accumulating at an accelerated pace, thus providing a balanced supply dynamic in the market.
2. Assessing traders’ profitability
Another indicator is the profitability of traders. Currently, unrealized margins on the network for traders are negative, suggesting a reduction selling pressure but not necessarily a preparation for a price recovery.
For a bullish signal, these margins need to turn positive and rise above the 30-day simple moving average.
“Since mid-June, the spot price has fallen below the cost basis of both 1-week to 1-month holders ($68,500) and 1-month to 3-month holders ($66,400). If this structure persists, it has historically resulted in a deterioration in investor confidence and there is a risk that this correction will be deeper and take longer to recover,” said Glassnode.
See more information: 8 Best On-Chain Analysis Tools in 2024
3. Assessing Stablecoin Liquidity
The growth in Tether USDT Market capitalization is a proxy for liquidity in the cryptocurrency market. After peaking at $12.6 billion in late April, growth over the past 60 days has slowed sharply to just $2.5 billion, marking the slowest pace since November 2023.
An acceleration in stable coin liquidity is essential for Bitcoin prices to rise. This will provide the market with the capital flow needed to support higher price levels.
4. Monitoring the final support level for Bitcoin price
The last indicator to watch is Bitcoin’s support level, currently pegged at $56,000 based on Metcalfe’s price assessment ranges.
“This assessment is based on the Metcalfe law which states that the value of a network is proportional to the number of users on the network,” explains CryptoQuant.
This level has historically acted as resistance and support in previous cycles. It also provided support for Bitcoin when its price fell to around $56,500 in May 2024. A drop below this critical support could signal a significant market correction, while holding above this level could suggest the market has bottomed.
See more information: How to value cryptocurrencies with fundamental and on-chain analysis
In the midst of these technical indicators, social sentiment also gives signs that the market may believe that the bottom has been reached. Santiment Analysis highlighted an increase in social volume and dominance of the term “bottom”, suggesting a growing belief among investors and traders that the price of Bitcoin may not fall further.
However, the market often tends to go against retail sentiments. Therefore, traders and investors should carefully consider the nuances and do their own research before building new market positions.
Disclaimer
In line with the Confidence Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult a professional before making any financial decisions. Please note that our Terms and conditions, Privacy PolicyIt is Disclaimers have been updated.