Bitcoin (BTC) could be bottoming out after gaining 25%, according to various market signals.
BTC price is up about 25% after falling to around $17,500 on June 18. The pullback to the upside came after a 75% correction when measured from its November 2021 high of $69,000.
However, the recovery appears modest and bears risks of continuation to the downside due to prevailing macroeconomic headwinds (rise rates, inflation, etc.) and the collapse of many high-profile cryptocurrency companies such as Three Arrows Capital, Terra, and others. .
But some widely tracked indicators paint a different scenario, suggesting that Bitcoin’s downside prospects from current price levels are slim.
That Big “Oversold” Bounce
The first sign of Bitcoin’s macro bottom comes from its weekly Relative Strength Index (RSI).
Notably, BTC’s weekly RSI became “oversold” after dipping below 30 in the week of June 13. That is the first time the RSI has slipped into the oversold region since December 2018. Interestingly, Bitcoin had ended its bear market rally in the same month. and rallied more than 340% in the next six months to $14,000.
In another case, Bitcoin’s weekly RSI fell to 30 (if not lower) in the week beginning March 9. That also coincided with the price of BTC bottoming out below $4,000 and then rising to $69,000 in November 2021, as shown below.
Bitcoin price has similarly bounced since June 18, opening the door to potentially repeat its history of parabolic rallies after an “oversold” RSI signal.
Bitcoin NUPL jumps above zero
Another sign of a potential Bitcoin macro bottom comes from its Net Unrealized Profit and Loss (NUPL) indicator.
NUPL is the difference between market capitalization and realized capitalization divided by market capitalization. It is represented as a ratio, where a reading greater than zero means investors are making a profit. The higher the number, the more investors will make a profit.
On July 21, Bitcoin NUPL surged above zero as the price hovered around $22,000. Historically, such a turnaround has followed with significant BTC price rallies. The graph below illustrates the same.
mining profitability
The third sign that Bitcoin forms a macro bottom comes from another on-chain indicator called the Puell Multiple.
The Puell Multiple examines mining profitability and its impact on market prices. The indicator does this by measuring a ratio of daily coin issuance (in USD) and the 365 moving average of daily coin issuance (in USD).
A strong Puell Multiple reading shows that mining profitability is high compared to the yearly average, suggesting that miners would liquidate their Bitcoin treasury to maximize revenue. As a result, a higher Puell multiple is known to coincide with macrotops.
Conversely, a lower Puell Multiple reading means that current miner profitability is below the yearly average.
Therefore, rigs with breakeven or below zero revenue from Bitcoin mining will risk going out of business, ceding market share to more competitive miners. The expulsion of weaker miners from the Bitcoin network has historically reduced selling pressure.
Interestingly, the Puelle Multiple reading as of July 25 is in the green box and is similar to the levels seen during the March 2020 crash, the 2018 and 2015 price lows.
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