In the crypto ecosystem, pinpointing the exact moment Bitcoin (BTC) prices bottom is akin to finding a needle in a haystack. However, recent data offers some insights into whether the Bitcoin price has bottomed out.
As the digital currency hit a one-month low of $58,500, analysts from CryptoQuant and Glassnode revealed four key indicators on the chain to watch. These indicators can be useful for analyzing market behavior near the lows and understanding the conditions necessary for prices to recover and rise again.
1. Track Bitcoin Demand Growth
The first quarter of 2024 saw a remarkable surge in Bitcoin demand that coincided with the launch of US spot ETFs, which set record highs. After May, however, this demand experienced a significant slowdown.
It is essential to observe the demand of permanent holders to determine if Bitcoin has bottomed. Permanent holders are now buying at a rate of 72,000 Bitcoin per month.
However, demand is significantly lower than in early 2024. A recovery to these levels is essential for a sustainable price rally.
Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030
Apart from the demand side, Glassnode’s analysis reveals significant insights into the behavior of long-term holders (LTHs), which also play a crucial role in the supply side. LTHs typically distribute coins and take profits during bull markets, which help establish market cycle stops.
Currently, the market is witnessing a regime where LTH disposal is moderated. This indicates a movement towards equilibrium rather than euphoria, which is a phase when the unrealized gains of LTHs are more than 250%. The high profits motivate LTHs to sell BTC aggressively, marking a market top.
The current equilibrium phase indicates that while LTHs are not yet ready to offload their holdings on a large scale, they are also not accumulating at a rate, thus providing a balanced supply dynamic in the market.
2. Evaluation of the profitability of traders
Another indicator is the profitability of traders. Currently, on-chain unrealized margins for traders are in the negative, indicating reduced selling pressure, but not necessarily a readiness for a price pullback.
For a bullish signal, these margins must turn positive and rise above their 30-day simple moving average.
“Since mid-June, the spot price has fallen below the cost basis of both the 1-week to 1-month-old containers ($68,500) and 1-month to 3-month-old containers ($66,400). If this structure persists, it has historically led to a weakening of investor confidence and risks this correction being deeper and taking longer to recover from,” Glassnode said.
Read more: 8 Best On-Chain Analysis Tools in 2024
3. Evaluation of Stablecoin Liquidity
The growth in Tether’s USDT market cap is a proxy for liquidity in the cryptocurrency market. After peaking at $12.6 billion at the end of April, growth has slowed dramatically over the past 60 days to just $2.5 billion, the slowest pace since November 2023.
An acceleration in stablecoin liquidity is essential for Bitcoin prices to recover. This will provide the market with the necessary capital inflows to support higher price levels.
4. Monitoring the Ultimate Bitcoin Price Support Level
The final indicator to watch is Bitcoin’s support level, currently pegged at $56,000 based on Metcalfe’s price valuation bands.
“This valuation is based on Metcalfe’s Law which states that the value of a network is proportional to the number of users in the network,” explains CryptoQuant.
This level has historically acted as both resistance and support in previous cycles. It also lent support to Bitcoin when its price fell to around $56,500 in May 2024. A drop below this critical support could indicate a significant market correction while holding above this level could indicate that the market has bottomed.
Read more: How to evaluate cryptocurrencies with on-chain & Fundamental Analyses
Amidst these technical indicators, social sentiment is also showing signs that the market may believe the bottom has been reached. Analysis from Santiment highlighted a rise in social volume and dominance for the term “under,” suggesting a growing belief among investors and traders that Bitcoin’s price cannot fall any further.
However, the market often tends to go against the retail sentiments. Traders and investors should therefore carefully consider the nuances and do their own research before building new market positions.
Disclaimer
In accordance with the Trust Project Guidelines, this price analysis article is for informational purposes only and should not be construed as financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult a professional before making any financial decisions. Please note that our terms and conditions, privacy policy and disclaimers have been updated.
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