• This article provides an overview of on-chain cyclical indicators that potentially point to a classic bottom in Bitcoin price.
• Market extremes can be seen where these indicators have proven to be most useful, but this could also be a bear market rally.
• We can view various cohorts of bitcoin holders and understand where they are in terms of profit or underwater by looking at the realized price, STH realized price and LTH realized price.
Overview of On-Chain Cyclical Indicators
This week’s dashboard release highlighted key on-chain metrics we like to track. In this article, we want to walk through more of those in detail. Across bitcoin’s short history, many on-chain cyclical indicators are currently pointing to what looks to be a classic bottom in bitcoin price. Market extremes — potential tops and bottoms — are where these indicators have proven to be the most useful.
Potential for Bear Market Rally
However, these indicators need to be considered alongside many other macroeconomic factors and readers should consider the possibility that this could be another bear market rally — as we still sit below the 200-week moving average price of around $24,600. That being said, if price can sustain above $20,000 in the short-term, the bullish metrics paint a compelling sign for more long-term accumulation here.A major tail risk is a possible market-wide selloff in risk assets that are currently pricing a «soft landing» style scenario along with the potentially incorrect expectations of a Federal Reserve policy pivot in the second half of this year. Many economic indicators and data still point to the likelihood that we’re in the midst of a bear market similar to 2000-2002 or 2007-2008 and the worst has yet to unfold.
Secular Bear Market
This secular bear market is what’s different about this bitcoin cycle compared to any other in the past and what makes it that much harder to use historical bitcoin cycles after 2012 as perfect analogues for today. All that being said, from a bitcoin-native perspective, the story is clear: Capitulation has clearly unfolded, and HODLers held the line.
Transparent Nature Of Bitcoin Ownership
Given the transparent nature of bitcoin ownership, we can view various cohorts of bitcoin holders with extreme clarity. In this case, we are viewing the realized price for the average bitcoin holder as well as the same metric for both long-term holders (LTH) and short-term holders (STH). The realized price, STH realized price and LTH realized price can give us an understanding of where various cohorts of the market are in profit or underwater.
Flipped Losses To Profits
On a monthly basis, realized losses have flipped to profits across all cohorts except STH who remain slightly underwater relative to their purchase prices from late 2020/early 2021 highs however no longer enough for it not matter given current spot prices hovering around $35k-$37k~ levels