In today’s on-chain analysis, BeInCrypto presents a ranking of the TOP 5 metrics that indicate the end of the BTC bear market. Although many chain indicators already pointed to a bottom in mid-2022, many were still neutral.
However, as 2022 draws to a close, more and more major indicators are pointing to a bearish Bitcoin price. The list of TOP 5 chain indicators that indicate the end of declines include:
Decline in BTC price from ATH
Interest in Profit Offer
Realized net profit/loss
Decline in BTC price from ATH
The first of the TOP 5 on-chain indicators that indicate that Bitcoin has reached the end of a bear market is the Price Change from ATH. It measures the percentage decline in BTC price from consecutive all-time highs (ATHs).
On the long-term chart of this indicator and the price of Bitcoin, we see 4 periods where the Price Decline from the ATH remains in extremely low territory. Of course, they are associated with the ends of historical bear markets and the macro bottoms of the BTC price. Previous lows were -93% (2011), -85% (2015) and -83.5% (2018).
Currently, BTC price’s lowest point of decline from ATH was recorded on November 21, 2022 at -77%. Although this is not as low as the bottoms of the previous bear markets, we see the depth of the declines weakened in the subsequent periods.
In addition, we see that the extreme downward deviation from the ATH has lasted for at least several months in the past. Therefore, even if BTC has already reached a macro bottom, we should not expect a quick recovery of the uptrend.
BTC Price Decline from ATH / Source: Glassnode
TOP 5 chain indicators: Supply Percentage in Profit
Another indicator that indicates the end of a bear market is the Bid on Profits. Shows the percentage of available coins whose price was lower than the current price during the last move.
On the long-term chart of the 14-day moving average of this indicator, we see that the demarcation line for extreme lows is the 50% bid level in profit (green area). So far, Bitcoin has only been below this line 5 times. Twice in 2011 and now briefly touched 48% territory; similarly, the 50% level during the March 2020 COVID-19 crash (blue circles).
However, the index doubled deeper and fell at 42%. This happened at the bottoms of 2015 and 2019 (red areas). Therefore, depending on which scenario plays out this time, the indicator may have already bottomed at 48%, or further declines in BTC price and the 42% level may be on the horizon.
Interest on Profit Offer / Source: Glassnode
Another way to show this is to plot the extremes of the market on a chart. Again, we can see that the current situation looks more like the lows of 2011 and the collapse of 2020 than the previous 2 bear markets.
Realized net profit/loss
The third place in the list of TOP 5 chain indicators is realized net profit/loss. It is defined as the net profit or loss of all transferred coins expressed in dollars (USD). In other words, it is the simple difference between realized profit and realized loss.
In the current market, Bitcoin’s dollar valuation is so high that the net realized profit/loss ratio is at an all-time low. On November 18, 2022, it reached an all-time low (ATL) of -$4.30 billion. The previous records were set on June 13, 2022 (-$4.23 billion) and June 25, 2021 (-$3.46 billion).
If we compare these extremes to the previous bear market or even the COVID-19 crash, we note that the realized net gain/loss has been milder. On March 12, 2020, the ratio bottomed out at -$1.39 billion. In contrast, the bottom of the previous bear market was only on December 5, 2018 – $948 million.
Realized net profit/loss / Source: Glassnode
However, if we normalize realized net profit/loss by market capitalization, we see that the lowest level was reached during the June dips. At that time, this rate reached -6.22% ATL. For comparison, in historical bear markets, it fell to -6.00% in January 2015, and -5.39% in December 2018.
Another interesting indicator is the Realized Profits-to-Value (RPV) ratio. It is defined as the ratio of realized profit to realized market capitalization. This metric compares a market’s profit realization to its total dollar-for-dollar value.
According to Glassnode, the green area between the 0.00005 and 0.00017 levels indicates good opportunities for Bitcoin purchases. However, in exceptional cases, the indicator even falls below this area and indicates excellent buying opportunities.
So far this has only happened three times in history – in 2015, 2019 and now (blue areas). Moreover, in the previous two cases, these extreme lows occurred after the BTC price had already fallen. If this were to happen again now, Bitcoin might already have bottomed out this bear market.
Realized Profit / Source: Glassnode
TOP 5 chain indicators: MVRV Z-score
Last in the list of TOP 5 on-chain indicators pointing to the downside in the price of BTC is the well-known MVRV Z-score. In short, it is used to estimate whether Bitcoin is overvalued or undervalued relative to what is called “fair value”. It is calculated as the ratio of the difference between market value and realized value and the standard deviation of all historical market value data.
On the long-term chart, when the MVRV Z-score is in the green area, we can see that a bottom is a very good signal in Bitcoin price. The capitulation of the indicator has always been associated with the capitulation of the BTC price.
Moreover, we see that each successive bear market moved the MVRV Z-score to a slightly smaller extreme. This allows you to draw a rising support line (blue) where the indicator is currently located. If it holds, Bitcoin may have already bottomed out in the current bear market.
MVRV Z-Score / Source: Glassnode
To better understand the relevance of the MVRV Z-score to the health of the cryptocurrency market, you can overlay the colors representing it on the Bitcoin chart. This gives an indication of whether the market is overvalued (red, overheated) or undervalued (green, overcooled). According to this metric, the current price of bitcoin in the range of $16,000 to $20,000 seems to be quite undervalued.
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