3 Historically Accurate Bitcoin On-Chain Metrics Blink “Bottom”

Bitcoin (BTC) and other riskier assets fell on Oct. 21 as traders reviewed macro indicators suggesting the Federal Reserve would continue to raise interest rates. Nevertheless, the BTC/USD pair remains ranged within the $18,000-$20,000 price range, showing a strong bias conflict in the market.

BTC price has held above $18K since June

Notably, BTC’s price has been unable to dive deeper below $18,000 since the first tested support level in June 2022. As a result, some analysts believe that the cryptocurrency is bottoming out, as it has already corrected over 70% from its all-time high of $69,000, established nearly a year ago.

BTC/USD Daily Price Chart. Source: TradingView

“During the 2018 bear market, BTC saw a maximum peak-to-bottom decline of 84%, which lasted 364 days, while the 2014 cycle lasted longer, bottoming out after 407 days.” noted Arcane Research in its weekly crypto market report, adding:

“Both bottoms were followed by unusually low volatility.”

Bitcoin historical withdrawals. Source: Arcane Research

Additionally, a plethora of widely watched on-chain Bitcoin indicators also hint at a potential bullish turn ahead. Let’s look at some of the most historically significant metrics.

Bitcoin MVRV-Z Score

The MVRV-Z score assesses Bitcoin’s overbought and oversold status based on its market and fair value.

Historically, when Bitcoin’s market value crosses the true value, it indicates a market top (the red zone). Conversely, it indicates a market bottom (the green zone) when the market value exceeds the fair value.

Bitcoin MVRV Z-Score. Source: Glassnode

The MVRV-Z score has been in the green zone since late June, indicating that Bitcoin is bottoming out.

Reserve risk

Bitcoin’s reserve risk assesses the confidence of the token’s long-term holders relative to its price at the time. Historically, higher reserve risk (the red zone) has coincided with market tops, reflecting lower investment confidence at record high Bitcoin prices.

Conversely, higher trust and a lower Bitcoin price means a lower reserve risk (the green zone), or better risk/reward for investing.

Bitcoin Reserve Risk vs Price. Source: Glassnode

Bitcoin’s reserve risk dipped into the green zone at the end of June, suggesting that BTC may undergo a strong bullish reversal sooner or later.

Bitcoin Puell Multiple

The Puell multiple reflects the ratio of the daily Bitcoin issuance (in US dollars) to the 365-day moving average of the daily issuance value.

Related: Bitcoin Bear Market Will Last “Maximum 2-3 Months” — Interview with BTC analyst Philip Swift

Historical data shows that the Bitcoin market bottoms when the Puell multiple falls into the green zone defined by the 0.3-0.5 range. Conversely, the market peaks when the ratio crosses into the 4-8 red zone.

Bitcoin Puell Multiple vs Price. Source: Glassnode

As of October, Bitcoin’s Puell Multiple is within the green zone, indicating a potential price reversal ahead to the upside.

Like Cointelegraph reportedBTC balances on cryptocurrency exchanges have also fallen to multi-year lows at the fastest pace since June, suggesting that current price levels are becoming a key area for accumulation.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.