Bitcoin is currently pursuing the $95,000 mark after experiencing a slight increase in value. Several on-chain Bitcoin metrics suggest a potential market bottom. Between January 7 and January 9, Bitcoin’s price fell by 11%, dipping below $92,000 for the first time in nine days, which resulted in over $257.5 million in leveraged long positions being liquidated. This decline coincided with profit-taking, strong economic data, and uncertainties related to the impending inauguration of US President-elect Donald Trump.
Despite this short-term bearish movement, three data indicators hint that the drop to $92,000 might signify a local bottom for Bitcoin, presenting a promising entry point for investors.
Firstly, the Spent Output Profit Ratio (SOPR) has decreased to 0.98 as of January 10. SOPR measures the profit or loss of Bitcoin outputs by comparing coin values when last moved and when spent again. A SOPR less than 1, which indicates capitulation or a market bottom, suggests a good buying opportunity. Historical data shows that such drops in SOPR often precede price recoveries.
Sean Buckley, a Bitcoin investor, sees the drop to $92,800 as a major support area, suggesting it could be a strategic time to buy.
Another crucial metric, the Entity-adjusted Dormancy Flow, which evaluates the ratio of Bitcoin’s market cap to the annualized dormancy value, has also signaled a potential bottom. Historically, values below 250,000 have indicated a good buy zone, often preceding major price recoveries or signaling the end of price corrections.
Furthermore, the supply distribution by long-term holders has peaked. The slowed distribution rate suggests a shift from distribution to accumulation, historically aligning with market bottoms. In past cycles, continued price climbs have occurred even after distribution peaks, indicating a potential market rebound.
These indicators collectively propose that the worst might be over for Bitcoin, offering a promising outlook for recovery from its recent lows. However, every investment move carries risk, and investors should conduct their own research before making decisions.
