Bitcoin loss metric signals cycle bottom
Bitcoin loss metric signals cycle bottom
- K33 said more than 50% of Bitcoin's circulating supply is now held at a loss, a level that has historically appeared near market bottoms.
- The brokerage said previous bear markets often ended within weeks of the indicator being triggered, although past performance does not guarantee future outcomes.
- Other market indicators, including Block Scholes' Risk Appetite Index, also suggest selling pressure may be easing.
Bitcoin (CRYPTO:BTC) may be approaching a market cycle bottom after more than 50% of its circulating supply moved into unrealised losses, according to a report published by digital asset brokerage K33.
K33 said previous bear markets typically reached their lowest point within weeks of more than half of Bitcoin's supply being held at a loss, although it noted this cycle could differ because of the influence of spot Bitcoin exchange-traded funds.
“Historically, such a move has preceded a more bullish outperformance in spot prices and could lead to further allocation towards risk assets such as crypto,” said a Block Scholes spokesperson.
K33 said Bitcoin bottomed 31 days after the signal during the 2017 cycle, 23 days after the signal in 2018 and 13 days after the signal in 2022, while the 2014 cycle was an exception, taking 101 days and producing a lower price one year later.
Spot Bitcoin exchange-traded funds recorded two consecutive days of net inflows, including US$265 million on Monday, after experiencing US$4.51 billion in net outflows during June, according to Farside Investors.
Block Scholes also identified improving market conditions after its Risk Appetite Index rose from -1.27 on July 3, a level that historically preceded a median Bitcoin spot return of 12% over the following 100 days across eight previous instances.
K33 said the previous bull market was less pronounced than earlier cycles, leading the firm to suggest the current downturn could also prove less severe, while cautioning that changing market dynamics could produce different outcomes.
At the time of reporting, Bitcoin price was $63,003.41.
