Bitcoin (BTC) has been locked in a 10-month downtrend since reaching its all-time high of around $69,000 in November 2021. However, historical data suggests that the flagship cryptocurrency has entered the late stage of the bear market and may be near a price bottom.
The data was pointed out in the latest edition of the Week Onchain report by blockchain analytics firm Glassnode. Weighing the spot price of BTC against the cost basis of distinct cohorts of market participants using the market-value-to-realized-value (MVRV), the report noted that a price bottom may soon be in for Bitcoin.
Three cohorts of market participants including the overall market, long-term holders (LTH), and short-term holders (STH) were identified by the analysis. Comparing the spot market price to their various on-chain cost basis revealed that their MVRVs have spent around 56 days below a ratio of less than one – a region in which all cohorts are holding an unrealized loss.
While conceding that 56 days is still less than the average bottom forming duration of approximately 190 days of previous bear markets, the ratio still indicates a prolonged period of financial strain for STHs. As observed in other bear markets, such periods are usually followed by capitulation, where coins purchased near the cycle top are sold at much lower prices.
“Throughout the bear, persistent price depreciation leads the STH Realized Price to fall below the LTH Realized… This is synonymous with a capitulation, where coins purchased near the cycle top are sold and change hands at much lower prices,” the report said.
This capitulation crossover stage has not been reached despite Bitcoin having been in a 10-month drawdown. But going by the market’s trajectory, it should be expected soon (by mid-September), Glassnode said. It will also take around 145 to 339 days for the market to recover.
Other indicators also point to a Bitcoin price bottom nearing
Basically, the MVRV ratio compares the Market Capitalization versus its Realized Capitalization to get a sense of when price is above or below “fair value”, and to assess market profitability. Glassnode’s analysis comes after BTC has spent the last three months between a high of around $25,000 and a low of $17,500, and a considerable amount of this time around a price of $20,000.
Other analyses have also projected a price floor to be in this range. CNBC reported late last month that Bitcoin hash ribbons, another key market metric used by traders, flashed a buy signal to indicate a possible floor price.