How Bitcoin On-Chain Metrics Hint At A Long-Term Bottom

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Predicting the bitcoin bottom is something that is done with much fervor by investors in the space since it often means more profit if they can accurately catch the bottom. It often proves to be a difficult task but using blockchain metrics can provide some guidance. Presently, these blockchain metrics have fallen to new lows, which could point toward a possible bottom for bitcoin.

Blockchain Metrics Bottom Out

Bitcoin on-chain metrics had been inching towards new lows in the last couple of months. This spans across the Reserve Risk, Puell Multiple, the Realized HODL ratio, MVRV-Z Score, and the Market Value to Realized Value. All of these have reached a new low, which could mean that bitcoin is nearing a bottom.

For example, the Puell Multiple, the BTC daily issuance divided by the one-year moving average, had fallen to a new low since 2018. This has been quite a resilient metric even through the bear market of 2022. The Reserve Risk had followed the same trend, but this time around, reaching an all-time time low.

Realized HODL ratio which measures the hold patterns of investors using how long they have held the coins and the value of those coins, fell to a new 2-year low. Market Value to Realized Value also sits at one of its lowest points since 2020 as well.

On-chain metrics reach new lows | Source: Arcane Research

The Bitcoin MVRV-Z score is a metric that has done a much better job than others in helping to point toward a market bottom. It helps to measure if the digital asset’s current value is actually below its fair value, hence making it such a valuable metric.

Bitcoin At The Bottom?

Historically, it has been hard to pinpoint exactly when the digital asset has hit a new market bottom. The performance of these metrics has often followed the bottom of the market, as shown back in 2020, right before the bull market began.

Bitcoin price chart from TradingView.com

BTC falls below $19,200 | Source: BTCUSD on TradingView.com

However, there are other metrics that have been previously met to signal a cumulative market bottom for bitcoin which are still yet to be hit. An example is that bitcoin has historically always fallen more than 80% from its all-time high before reaching a bottom. But the problem with this is that it would put the digital asset right below its previous cycle peak, which had happened for the first time in 2022.

Even though these bitcoin on-chain metrics may not accurately point to a market bottom, they can often signal a good entry point for the asset. Additionally, BTC’s price is already trading lower than 70% of its ATH price. This also presents an opportunity to enter the market at a low price.

Featured image from Cryptoslate, charts from Arcane Research and TradingView.com

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