On-chain metrics continue to point to a Bitcoin bottom

Haru Invest

Previous chain studies have suggested that the Bitcoin market has bottomed. CryptoSlate has revised several Glassnode metrics indicating that the price has dropped.

However, macro factors that were not present in previous periods continue to potentially influence the current cycle.

Bitcoin Supply P/L Pools

Bitcoin Supply P/L Bands show the circulating supply in profit or loss based on whether the price of the token is higher or lower than the current price during the last move.

Market cycle bottoms coincide with the convergence of the Supply at Profit (SP) and Supply at Loss (SL) lines, which most recently occurred around Q4 2022. The subsequent act of separating the lines from each other corresponds to the price movement in the past.

Currently, the SP range has risen sharply to break away from the SL range, indicating that there could be a macro upside in price if the pattern continues.

Bitcoin Supply P/L Pools
Source: Glassnode.com

From market value to realized value

Market value to realized value (MVRV) refers to the ratio between market value (or market value) and realized cap (or retained value). MVRV combines this information to indicate whether the Bitcoin price is trading above or below “fair value”.

MVRV is further divided by long-term and short-term holders, Long-Term Holding MVRV (LTH-MVRV) refers to unspent operating results with a useful life of at least 155 days, and Short-Term Holding MVRV (STH-MVRV) is equalized. For an unspent transaction period of 154 days or less.

The previous cycle bottoms showed the convergence of the STH-MVRV and LTH-MVRV lines, with the former crossing above the latter to signal a bullish reversal in price.

Convergence between STH-MVRV and LTH-MVRV lines occurred during Q4 2022. And in recent weeks, STH-MVRV has moved above LTH-MVRV, indicating the possibility of a price trend reversal.

Source: Glassnode.com

Young Supply Recent Active < 6m & Profit Owners

Young Supply Last Active <6m (YSLA<6) refers to Bitcoin tokens that have transacted within the last six months. The opposite scenario would be long-term holders sitting on their tokens and not actively participating in the Bitcoin ecosystem.

At bear market bottoms, YSLA<6 tokens represent less than 15% of the circulating supply as non-believers/hit-and-run speculators exit the market during periods of depressed pricing.

The chart below shows that YSLA<6 tokens reached a “less than 15% threshold” at the end of last year, indicating that speculative interest has capitulated.

Bitcoin Young Supply Is The Last Asset
Source: Glassnode.com

Similarly, the chart below shows Long Term Takers currently near All Time Lows (ATL). This confirms that long-term holders own the bulk of the supply and are not dependent on the -75% price decline from the market peak.

Bitcoin long and short term profit holders
Source: Glassnode.com

Futures constant funding rate

Futures constant funding rate (FPFR) refers to periodic payments made to or by derivatives traders, both long and short, based on the difference between the perpetual contract markets and the spot price.

During periods of positive funding rate, the price of the open-ended contract is higher than the quoted price. In this case, long traders pay for short positions. In contrast, a negative funding rate indicates that standing contracts are priced below the quoted price and short traders are paying for the long term.

This mechanism keeps futures contract prices in line with the spot price. FPFR can be used to gauge traders’ sentiment, as positive interest rates indicate bullish sentiment and vice versa.

The chart below shows periods of negative FPFR, particularly during black swan events, which are usually accompanied by price reversals. The exception was the Terra Luna de-peg, which likely triggered a number of centralized platform failures and therefore acted as a headwind against positive market sentiment.

From 2022, the magnitude of the funding rate, both positive and negative, has decreased significantly. This represents fewer convictions in both directions than before 2022.

After the FTX scandal, the FPFR was primarily negative, indicating a bearish overall market and likely price declines. Interestingly, the FTX scandal caused the most extreme move in the funding rate before 2022.

Bitcoin Futures constant funding rate
Source: Glassnode.com

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