Determining if Bitcoin Has Reached its Bottom: Key Indicators to Watch
Market analysts from CryptoQuant have identified key on-chain metrics that could indicate a potential bottom in the bitcoin (BTC) price and the beginning of a new rally in the cryptocurrency market.
In their recent weekly report, CryptoQuant highlighted several signals to monitor, including a surge in bullish momentum, increasing demand for BTC, and rapid growth in stablecoin liquidity.
The current state of the market, as indicated by CryptoQuant’s Bitcoin Bull-Bear Market Cycle indicator, suggests that the crypto market is experiencing its lowest level of bullish sentiment since the U.S. banking crisis in March 2023. With BTC trading around $61,000 and hitting a one-month low of $58,500 earlier in the week, a resurgence in bullish momentum is crucial for price recovery. To achieve this, the Bull-Bear Market Cycle indicator needs to surpass its 30-day simple moving average.
Moreover, the growth in Bitcoin demand needs to accelerate to levels witnessed in the first quarter of the year to support price recovery. While there has been some recovery in demand post-May, the current growth rate remains sluggish compared to the early months of the year when U.S. spot Bitcoin exchange-traded funds were launched.
An essential indicator of a potential price bottom is the increased buying activity from long-term Bitcoin holders. Currently, these investors are acquiring BTC at a monthly rate of 72,000 BTC, a significant drop from the 160,000 BTC monthly rate in Q1. Although there has been a slight uptick from the May rate of 68,000 BTC, higher buying volumes are necessary to drive prices upwards.
The ultimate support level for Bitcoin stands at $56,000 based on Metcalfe price valuation bands, which served as resistance levels in the previous cycle. A breach below this support level could trigger a substantial correction, further eroding market value and determining whether Bitcoin has reached a bottom.
Additionally, a positive shift in traders’ on-chain unrealized profit margins could signal upcoming price rallies. An uptick in Bitcoin flow from various exchanges to Coinbase indicates increased demand from U.S. investors, typically associated with higher prices.
Lastly, the acceleration in stablecoin liquidity, particularly the 60-day growth of Tether’s (USDT) market cap, signifies an influx of capital into the market, a critical factor for price movements in an upward direction.
