As the eyes of the crypto community turn to tomorrow’s Federal Reserve FOMC meeting, an on-chain analysis from Glassnode suggests that the bottom simply needs to be ironed out.
in their weekly report good, the firm says that several metrics are currently bouncing, making a relatively consistent argument that the bitcoin market has bottomed out. In this regard, the current numbers are “almost textbook” compared to the lows of the previous cycle.
To back up the claim, Glassnode takes the advice of Mayer Multiple and Actual Value. The latter of the two metrics calculates the acquisition price per coin. This allows it to be determined whether the overall market shows an unrealized loss that occurs when the spot price is lower than the actual price.
Mayer helps in assessing multiple overbought and underbought conditions. It plots the relationship between the BTC spot price and the 200-day simple moving average. The latter is a widely used model in traditional financial analysis. Gasnode writes:
Notably, this pattern is repeated in the current bear market, with June lows trading below both models for 35 days. The market is currently falling below the actual price at $21,111, where a break above would be a notable sign of strength.
It Takes Time for Bitcoin to Build a Bottom
A third metric considered by Glassnode, the balanced value, is the difference between the actual value and the transferred value. The “fair price” model is currently hovering around $16,500.
As Glassnode notes, in previous cycles the price of bitcoin moved in a range between real value and balanced value for 5.5 to 10 months before a breakout occurred.
During the bear markets of 2014 and 2015, the price of BTC remained in the range between the two indicators for 10 months. Within the bear market of 2018/2019, it was only 5.5 months. If history repeats, bitcoin investors can expect a bear market to continue for a while.
Another feature of the bottom formation is the constant change of bitcoin owners. This behavior of investors can be analyzed by tracking the UTXO Realized Price Distribution (URPD). According to Glassnode, the proportion of supply that has changed so far is important, but perhaps not sufficient.
During the 2018-2019 lows, about 22.7% of the total supply moved into the range when the price broke below and above that metric for the first time in real terms.
A similar analysis of 2022 shows that only about 14.0% of the supply has been redistributed in this category so far. Thus, this metric also suggests that “an additional step of redistribution is needed” before finally coming down.
However, at the same time, the research firm cautions that there is currently “no solid influx of new demand.” Nevertheless, the company gives an optimistic outlook and claims:
The bear-to-bull transition doesn’t appear to have been made yet, however, as there appears to be seeds planted in the ground.
At the time of writing, BTC is trading above $20.6k and is nearing its 100-day moving average (green line). The 200-day moving average is currently near $24,500 and thus still far away.