Bitcoin (BTC) and other riskier assets fell on Oct. 21 as traders analyzed macroeconomic indicators that suggest the Federal Reserve will keep raising rates. Nevertheless, the BTC/USD pair remains within the $18,000-$20,000 price range, showing a strong trend conflict in the market.
BTC Price Holds Above $18,000 Since June
Notably, BTC price has not been able to dive deeper below $18,000 since it first tested support in June 2022. As a result, some analysts believe that the cryptocurrency is bottoming out, given that it has already corrected more than 70% from its all-time high of $69,000, set nearly a year ago.
“During the 2018 bear market, BTC saw a maximum 84% drawdown from peak to trough, lasting 364 days, while the 2014 cycle lasted longer, bottoming out after 407 days”Arcane Research noted in its weekly crypto market report, adding:
“Both lows were followed by unusually low volatility.”
Furthermore, a flood of widely watched Bitcoin on-chain indicators also point to a potential bullish reversal ahead. Let’s look at some of the most significant metrics historically.
Bitcoin MVRV-Z Score
The MVRV-Z score assesses Bitcoin’s overbought and oversold states based on its fair and market value.
Historically, when the market value of Bitcoin crosses the fair value, it indicates a market top (the red zone). Rather, it indicates a market bottom (the green zone) when the market value crosses below fair value.
The MVRV-Z score has been in the green zone since the end of June, suggesting that Bitcoin is bottoming out.
reserve risk
Bitcoin Reserve Risk assesses the long-term confidence of holders of the token relative to its current price. Historically, higher Reserve Risk (the red zone) has coincided with market highs, reflecting lower investor confidence in Bitcoin’s record prices.
On the contrary, higher trust and a lower Bitcoin price mean lower Reserve Risk (the green zone), or a better risk/reward ratio for the investment.
Bitcoin Reserve Risk dipped into the green zone at the end of June, suggesting that BTC may undergo a strong bullish reversal sooner or later.
Bitcoin Puell Multiple
The Puell Multiple reflects the relationship between the daily issuance of Bitcoin (in US dollars) and the 365-day moving average of the value of the daily issuance.
Historical data shows that the Bitcoin market bottoms out when the Puell Multiple falls into the green zone defined by the 0.3-0.5 range. On the contrary, the market peaks when the ratio crosses into the red zone of 4-8.
As of October, the Bitcoin Puell Multiple is inside the green zone, suggesting a potential price reversal to the upside.
As Cointelegraph reported, the balance of BTC on crypto exchanges has also fallen to multi-year lows at the fastest pace since June, suggesting that current price levels are becoming a major area of accumulation.
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