On-Chain Data Suggests Bitcoin Bottom Is Near

As the eyes of the crypto community turn to tomorrow’s Federal Reserve FOMC meeting, an on-chain analysis by Glassnode suggests that the bottom just needs to be hammered out.

According to their weekly report, a variety of indicators are currently moving, indicating that there is a consensus that the market has bottomed. In this regard, the current numbers are “almost textbook” comparable to previous cycle lows.

Glassnode uses the Mayer Multiple, and the Realized Prices to back up his claims. This calculates the purchase price per coin. This allows us to calculate the amount of unrealized losses in the overall market. It is calculated when spot prices are lower than the Realized price.

It helps to assess the over- and underbought situations. This plots the relationship between BTC’s spot price and 200-day Simple Moving Average. This model is widely used for traditional financial analysis. Gassnode writes

Surprisingly, the pattern was repeated during the bear market. The June lows have traded below the respective models for 35 consecutive days. The current market is trading near the bottom of the Realized Price of $21,111. A break above this level would indicate strength.

Bitcoin mayer multiple

Bitcoin Bottom Forming Takes Time

Glassnode considers a third measurement, the balance price. This is the difference in the realized and transferred prices. The  “fair value” model is currently hovering around $16,500.

Glassnode notes that in previous cycles, the Bitcoin Price fluctuated in the area between the Realized Price or the Balanced Price during 5.5 to 10 months before it reached a peak.

In the 10 month period between 2014 and 2015, BTC prices remained in the same range as the other metrics for 10 months. It was only 5.5% during the 2018/2019 bear. Bitcoin investors should expect that the bear market will continue if historical trends repeat.

Bitcoin realized price

An ongoing shift in Bitcoin ownership is also a sign that there has been a bottom. The UTXO Realized Price Distribution can help you analyze this behavior. Glassnode says that although the supply has been changed so far, it is not sufficient.

About 22.7% moved during the 2018-2019 bottoming periods in the period when prices first fell below the Realized price and above it metric.

This same analysis shows that approximately 14.0% of the supply in 2022 has been distributed within this range. Thus, this metric also suggests that “an additional phase of redistribution is needed” before a bottom is finally in.

However, at the same time, the research firm cautions that there is currently “no convincing influx of new demand.” Nevertheless, the company gives an optimistic outlook and claims:

Although it does not seem that the transition from bear to bull has occurred yet, seeds are being planted.

BTC traded at $20.6k as of the writing and was close to its 100-day moving mean.

BTC USD chart
Bitcoin near the 100-day MA. Source: TradingView

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