Traders think Bitcoin bottomed, but on-chain metrics point to one more capitulation event

Bull market euphoria which drove prices to new heights through 2021 has been replaced by bear market doldrums. This applies to any Bitcoin (BTC), buyer who purchased Bitcoins since January 1, 2021. Glassnode data shows that these buyers are “now underwater” and the market is preparing for a final capitulation.

Bitcoin net unrealized profit/loss. Source: Glassnode

The NUPL is a metric that measures the total unrealized profit or loss of the network in relation to the market capital. It is shown in the graphic. This “resembles a market structure similar to pre-capitulation phase in previous bear markets.”

Based on past capitulation events, Bitcoin’s price could fall to $20,560 to $27,700 in a “full scale capitulation scenario.”

The market is looking for the bottom

The crypto market is clearly trading in bearish territory. Everyone is asking “Where is the bottom?”

The Mayer Multiple is a metric that may provide guidance. It tracks the ratio of price to the 200-day moving mean.

Mayer Multiple model for Bitcoin. Source: Glassnode

According to Glassnode, in bear markets past, “oversold and undervalued conditions” have coincided with the Mayer Multiple falling between 0.6 and 0.8. This is exactly the range where Bitcoin currently finds itself.

Based on previous bear market price action, the Bitcoin trading range between $25,200 & $33,700 corresponds to the B phase and could be the lowest BTC level in the current cycle.

The Bitcoin realized price model provides insight into the potential bottom price of Bitcoin. According to LookIntoBitcoin, the Bitcoin data provider LookIntoBitcoin, the realized Bitcoin price is $23,601 as at June 5.

Bitcoin reached its peak price. Source: LookIntoBitcoin

These two metrics combined suggest that BTC’s low could be in the $23,600-25,200 range.

Related: Institutional investors buy Bitcoin amid crypto bear market: CoinShares

Capitulation of miner and short term holder

The current market conditions have been dominated by short term hodlers. This is similar to what was observed during the previous extended bear market, where long-term investors held over 90% of the market profit.

Bitcoin investors who have been long-term Bitcoin owners share in the supply of profit. Glassnode

Bitcoin’s recent plunge below $30,000 saw the supply of profit rise to above 90% in the long-term holder cohort. This suggests that short-term holders “essentially reached a near peak pain threshold.”

Glassnode reports that miners have been net sellers in recent weeks due to the decline in BTC. This has led to “an aggregate miner balance decrease of between 5K-8K BTC per month.”

Bitcoin miner net position change. Source: Glassnode

If the price of Bitcoin continues to fall, there is a possibility of miner capitulation. This is as evidenced by the Puell Multiple. It is the ratio between the daily issuance of bitcoin and the 365-day moving mean of this value.

Puell multiple vs. BTC Price Source: LookIntoBitcoin

Historical data indicates that the metric fell into the sub-0.5 area during bear markets. This has not occurred during this current cycle. A 10% drop in BTC prices could result in a final miner capitulation, which would be similar to the selling and price decline seen at the peak of previous bear market.

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