Is The Bitcoin Bear Market Over? An Increasingly Strong Confluence of On-Chain/Technical Indicators Say Yes
Six of the eight indicators viewed by analysts at crypto data analytics platform Glassnode to determine when Bitcoin is emerging from a bear market are flashy bullish signals, and a seventh is likely to turn green soon as well. Glassnode’s “Recovering from a Bitcoin Bear” indicator dashboard seeks to help Bitcoin investors identify when the Bitcoin market is moving towards a healthier trend by looking at a combination of on-chain, technical, and network fundamental indicators.
Historically, at least 5 of these indicators have flashed green when Bitcoin prices are rising. Meanwhile, when all eight indicators start flashing bullish signals, this has historically been a great buy signal. Conversely, when less than five of these indicators are flashing green, Bitcoin’s price is typically on a sustained decline. Light blue indicates time periods when at least five of the eight bullish conditions have been met. Dark blue indicates time periods when all eight have been met.
Signal 1 and 2: Spot prices are trading above the major pricing models
Glassnode groups these indicators into four categories. The first is whether or not Bitcoin is trading above the major pricing models — the 200-day Simple Moving Average (SMA) and Realized Price, an on-chain indicator that shows the average price of when each Bitcoin on the network was last is moved. (the average price wallets “paid” for their Bitcoins when they received them).
With Bitcoin’s 200DMA hovering around $19,600 and realized price around $19,800, Bitcoin recently broke back north of both key levels for the first time since December 2021. So both flash green.
Signal 3 and 4: Network utilization is increasing
The 30-day SMA of new addresses has recently moved above the 200-day SMA, so it is flashing green. This happened historically at the beginning of bull markets.
Meanwhile, the Revenue From Fees Multiple still has a negative 2-year Z-score of about -0.33. The Z-score is the number of standard deviations above or below the mean of a data sample. In this case, Glassnode’s Z-score is the number of standard deviations above or below the average Bitcoin Fee earnings over the past 2 years.
So this indicator is still not flashing green. However, as history shows, this could change very quickly.
Signal 5 and 6: Market profitability returns
The 30-day Simple Moving Average (SMA) of the Bitcoin Realized Profit-Loss Ratio (RPLR) indicator crossed above one for the first time last April. That means that the Bitcoin market realizes a larger share of the profits (in USD terms) than the losses.
According to Glassnode, “generally this means that sellers are exhausted with unrealized losses and there is a healthier inflow of demand to offset profit taking”. Therefore, this indicator sends a bullish sign.
Meanwhile, even though the Adjusted Spent Output Profit Ration (aSOPR), an indicator that shows the amount of realized profit and loss for all coins moved on the chain, remains below 1 (indicating that the market is not yet making a profit), is moving higher soon and looks like it will cross 1 soon. It was the last at 0.988.
This is the seventh indicator that is not yet sending a bullish signal, but will likely be soon. Looking back over the past eight years of Bitcoin history, the aSOPR rising above 1 after a prolonged period below it was a fantastic buy signal.
Signals 7 and 8: BTC balance has shifted in favor of the HODLers
The Bitcoin Realized HODL Multiple has been in an uptrend for the past 90 days, a bullish sign according to Glassnode. The crypto analytics firm states that “when the RHODL Multiple transitions into an uptrend over a 90-day period, it indicates that USD-denominated wealth is starting to shift back to new demand inflows.” It “indicates that profits are being taken, that the market is able to absorb them… (and) that long-term holders are starting to issue coins,” states Glassnode.
Glassnode’s final indicator in its Recovering from a Bitcoin Bear dashboard is whether or not the 90-day exponential moving average (EMA) of Bitcoin Supply in Profit has been in an upward trend for the past 30 days. Supply in Profit is the number of Bitcoins last moved when prices in USD were lower than they are today, implying they were bought at a lower price and the wallet is holding a paper profit. This indicator also flashes green.
So Are We in a Bitcoin Bull Market?
The macroeconomic headwinds of 2022 appear to be easing. US inflation is rapidly falling to more acceptable levels and with the US economy stalling, as evidenced by recent survey data and corporate earnings, the bond market’s estimate that the Fed won’t be able to tighten rates much further in 2023 appears to be an increasingly accurate call .
This story has been a key driver of Bitcoin’s 2023 rally so far, and many believe it could further support the price in the coming months. While some continue to deride the latest move higher as just another bear market rally, the aforementioned indicators in the Glassnode dashboard suggest that this latest move higher could be something more.
And these are not the only on-chain indicators that are flashing signals of an incoming bull market. According to analysis posted to Twitter by @GameofTrade_, 6 on-chain metrics including the Accumulation trend score, Entity-adjusted dormancy flow, Reserve risk, Realized price, MVRV Z-score and Puell multiple are “calls for a generation long-term buying opportunity “.
Elsewhere, the much-followed Bitcoin Fear & Greed Index recently returned to neutral territory (i.e. above 50) for the first time after a prolonged period of Fear and Extreme Fear. A lasting recovery to neutral often comes at the beginning of the next Bitcoin bull market, such as in early 2019 and then again in mid-2020.
Analyzing crypto-focused Twitter account @CryptoHornHairs made a stunning observation that Bitcoin follows almost exactly in the footsteps of a nearly four-year market cycle it has followed for the past more than eight years. After bottoming out last November, Bitcoin could continue to rise for nearly 1,000 days, the analysis suggests, before entering its next bear market in 2025.
A widely followed Bitcoin pricing model sends out a similar narrative. According to the Bitcoin Stock-to-Flow pricing model, the Bitcoin market cycle lasts about four years, with prices typically moving somewhere near the middle of the four-year gap between “halvings” – the Bitcoin halving is a four-year phenomenon where the mining reward is cut in half, slowing Bitcoin inflation. Past price history suggests Bitcoin’s next big surge will come after its next halving in 2024.