3 Historically Accurate Bitcoin On-Chain Calculations Flash “The Bottom”
Bitcoin (BTC) and other riskier assets fell on October 21 as traders scrutinized macro indicators suggesting the Federal Reserve will continue to raise interest rates. Nevertheless, the BTC/USD pair remains range within the $18,000-$20,000 price range, showing a strong bias conflict in the market.
BTC price held above $18K since June
In particular, BTC’s price has not been able to dive deeper below $18,000 since it first tested the support level in June 2022. As a result, some analysts believe that the cryptocurrency is about to bottom, given that it has already corrected by over 70 % from record high. of $69,000, established nearly a year ago.
“During the 2018 bear market, BTC saw a maximum peak-to-bottom decline of 84%, lasting 364 days, while the 2014 cycle lasted longer, bottoming out after 407 days,” Arcane Research noted in its weekly crypto market report, adding to:
“Both bottoms were followed by unusually low volatility.”
In addition, a number of widely watched on-chain Bitcoin indicators also suggest a potential bullish reversal ahead. Let’s look at some of the most historically significant calculations.
Bitcoin MVRV-Z Score
The MVRV-Z Score assesses Bitcoin’s overbought and oversold statuses based on market and fair value.
Historically, when Bitcoin’s market cap crosses fair value, it indicates a market top (the red zone). Conversely, it indicates a market bottom (the green zone) when the market value crosses below fair value.
The MVRV-Z score has been in the green zone since late June, suggesting that Bitcoin is about to bottom.
Reserve risk
Bitcoin’s reserve risk assesses the confidence of the token’s long-term holders relative to its price at the time. Historically, a higher reserve risk (the red zone) has coincided with market tops, reflecting lower investment confidence at record high Bitcoin prices.
Conversely, higher trust and a lower Bitcoin price means a lower reserve risk (the green zone), or better risk/reward for investing.
Bitcoin’s reserve risk plunged into the green zone at the end of June, suggesting that BTC may undergo a strong bullish reversal sooner or later.
Bitcoin Puell Multiple
The Puell multiple reflects the ratio of daily Bitcoin issuance (in US dollars) to the 365-day moving average of daily issuance value.
Related: Bitcoin Bear Market Will Last ‘Maximum 2-3 Months’ — Interview with BTC Analyst Philip Swift
Historical data shows that the Bitcoin market bottoms when the Puell Multiple falls into the green zone defined by the 0.3-0.5 range. Conversely, the market peaks when the ratio crosses into the red zone 4–8.
As of October, Bitcoin’s Puell Multiple is within the green zone, suggesting a potential price reversal ahead to the upside.
As Cointelegraph reported, BTC balances on cryptocurrency exchanges have also fallen to multi-year lows at the fastest pace since June, suggesting that current price levels are becoming a key area for accumulation.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
