in today on-chain analysis, BeInCrypto presents a ranking of the TOP 5 metrics that indicate the end of the BTC bear market. Although many on-chain indicators were already signaling the bottom in mid-2022, many others were still neutral.
However, as 2022 draws to a close, more and more key metrics appear to be signaling a bottom in Bitcoin price. Our list of top 5 chain indicators that indicate the end of declines included:
- ATH BTC Price Decline
- Profit Supply Percentage
- Realized net profit/loss
- Realized Benefits vs. Value
- Z-score MVRV
ATH BTC Price Decline
The first of the TOP 5 on-chain indicators that suggest Bitcoin has reached the end of the bear market is the ATH Price Drawdown. It measures the percentage decline in the price of BTC from consecutive all-time highs (ATH).
On a long-term chart of this indicator and Bitcoin price, we see 4 periods where ATH’s price decline remained in extremely low areas. Naturally, they correlate with the end of historic bear markets and macro lows in BTC price. The lowest points of previous declines were recorded at -93% (2011), -85% (2015) and -83.5% (2018).
Currently, the lowest point of the BTC price decline against ATH was recorded at -77% on November 21, 2022. While not as low as previous bear market lows, we see that the depth of declines weakens in subsequent cycles.
Additionally, we see that the extremely small deviation from the ATH has persisted for at least several months in the past. Therefore, even though BTC has already reached a macro bottom, a quick resumption of the bullish trend should not be expected.
TOP 5 On-Chain Indicators: Percentage of Supply in Profits
Another indicator that signals the end of a bear market is the profit supply percentage. It shows the percentage of existing coins whose price at the time of the last move was lower than the current price.
On a long-term chart of the 14-day moving average of this indicator, we see that the boundary line for extreme lows is the 50% offer level in profit (green area). Bitcoin has only been below this line 5 times so far. Twice it briefly touched the 48% zone, in 2011 and now; similarly, the 50% level during the March 2020 COVID-19 crash (blue circles).
However, on two occasions the index fell deeper and bottomed at 42%. This happened in the lows of 2015 and 2019 (red areas). Therefore, depending on which scenario plays out this time, the indicator may have already bottomed out at 48%, or further declines in the BTC price and the 42% level are on the horizon.
Another way to illustrate the same is to draw the extremes of the market on the chart. Again, we can see that the current situation looks more like the bears of 2011 and the crash of 2020, rather than the previous 2 bear markets.
Realized net profit/loss
The third in our list of top 5 on-chain indicators is Net Realized Profit/Loss. It is defined as the net profit or loss of all coins moved expressed in dollars (USD). In other words, it is the simple difference between the profit made and the loss made.
Bitcoin’s dollar valuation in the current market is so high that the net realized profit/loss ratio is at an all-time low. It hit an all-time low (ATL) of -$4.30 billion on November 18, 2022. Previous highs were set on June 13, 2022 (-$4.23 billion) and June 25, 2021 (-3 .46 billion dollars).
Comparing these extremes to the previous bear market or even the COVID-19 crash, we note that the realized net profit/loss has been much softer. On March 12, 2020, the ratio bottomed out at -$1.39 billion. In contrast, the previous bear market low was only -$948 million on December 5, 2018.
However, if one normalized the net result achieved by the market capitalization, one sees that the lowest level was reached during the declines in June. At this time, the ratio reached the ATL of -6.22%. By comparison, in historical bear markets, it fell to -6.00% in January 2015 and -5.39% in December 2018.
Realized Benefits vs. Value
Another interesting indicator is the Earnings to Value (RPV) ratio. It is defined as the ratio of earned profits to realized market capitalization. This measure compares the market’s profit realization to its overall dollar-for-dollar cost base.
According to data from Glassnode, the green zone between the 0.00005 and 0.00017 levels signals good opportunities for Bitcoin buys. However, in exceptional situations, the indicator even falls below this zone and signals excellent buying opportunities.
So far, this has only happened three times in history – in 2015, in 2019 and now (blue areas). Moreover, on the previous two occasions, these extreme lows occurred after the price of BTC had already bottomed out. If it were to happen again now, it is possible that Bitcoin has already bottomed out in this bear market.
TOP 5 on-chain indicators: MVRV Z-score
Last on the list of TOP 5 on-chain indicators that signal a bottom in the price of BTC is the famous Z-score MVRV. In short, it is used to assess when Bitcoin is overvalued or undervalued relative to its so-called “fair value”. It is calculated as the ratio of the difference between market value and realized value, and the standard deviation of all historical market value data.
On the long-term chart, we can see that whenever the Z MVRV score was in the green zone, it was a very good signal of a Bitcoin price bottom. The capitulation of the indicator has always been correlated with the capitulation of the BTC price.
Additionally, we see that each successive bear market has driven the Z MVRV score to slightly smaller extremes. This allows us to draw a rising support line (blue), where the indicator is currently located. If this holds, it is possible that Bitcoin has already reached the bottom of the current bear market.
To better understand the relevance of the Z MVRV score to the health of the cryptocurrency market, you can overlay the colors that represent it on a Bitcoin chart. This gives an indication of an overvalued (red, overheated) or undervalued (green, overcooled) market. According to this metric, the current Bitcoin price in the $16-20,000 range appears to be extremely undervalued.
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