Today’s on-chain analysis by BeInCrypto looks at three indicators that are currently at key support levels. Their hold could be a strong signal that Bitcoin (BTC) has bottomed out and rebounded to end the downtrend.
The entity-adjusted dormancy flow is the ratio of current market capitalization to annual dormancy. Expressed in US dollars. Indicators can be used to determine the lower limit of BTC prices when entering a green area under $ 250,000.
The current value of the entity-adjusted dormancy flow has just entered the green area and is $ 242,000 today. Except for the present, the area has only reached twice in the last two years (green circle).
In both historical cases, this was consistent with the BTC price macro bottom. Bitcoin reached the $ 4,000 area for the first time during the March 2020 COVID-19 crash. The second time, Bitcoin bottomed out at $ 29,000 in July 2021 and completed a 55% correction from its all-time high in April 2021.
Today, Bitcoin is at the $ 42,000 level and the dormancy flow is signaling the same. If the level is kept and the indicator bounces in the green area, the BTC price can continue to rise sharply. This is what happened in the previous two cases.
The Reserve Risk Indicator is defined as Price / HODL Bank. It is used to assess long-term Hodler confidence related to Bitcoin prices at any given time. If the investment is reliable and the price is low, the investment has an attractive risk / reward ratio (low reserve risk). If the reliability is low and the price is high, the risk / reward ratio is unattractive (high reserve risk).
The current reserve risk value reaches the top of the green area, similar to the dormant flow, with a value of 0.0027. Historically, it has marked a good area to buy Bitcoin, which had a good risk / reward ratio.
Interestingly, these values acted as a support during the 2012-2013 bull market (green ellipse). The rebound at this level was a signal of a subsequent parabolic rise in BTC prices.
However, there is another interpretation of this chart that depicts an apparently bearish scenario. Now, in the previous two cycles, reserve risk respected the rising support line (red). At that time, Bitcoin peaked without breaking this line. When support was lost (red circle), this was a signal for the bear market.
Such a support line is also implemented in this cycle, and it can be seen that it was already broken in early December 2021. Interpreting this event in the same way as the previous two cycles, Bitcoin has already entered the bare market.
The final indicator of today’s on-chain analysis is the profitable UTXO. Shows the percentage of unused transaction output whose price at creation was lower than the current price. In other words, it’s one of the indicators that you can see what percentage of BTC holders are making a profit.
Like the two indicators above, the profit UTXO is at an important point today, pointing to the 83% area (green line). This level served as support during the September-October 2020 BTC price adjustments just before the parabolic rally. At that time, Bitcoin was in the $ 10,000 area.
In the second case, this support was held at the end of July 2021 following the aforementioned amendment from ATH in April 2021. At that point, Bitcoin’s price bottomed out at $ 29,000.
Today, the indicators are in a similar area. That holding could be another signal that the $ 40,000- $ 42,000 area will act as BTC’s next macro bottom before the rise continues.
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