On-Chain Data Flashes Bitcoin Buy Signal, But Bottom May Be Below $20K

Every Bitcoin investor is looking for a signal that the market is nearing a bottom, but this week’s price action suggests we are not there yet.

Evidence of this can be found by looking at Bitcoin’s monthly returns (bitcoin), it was hit by a rapid decline that “translated into one of the largest monthly declines in returns in the history of the asset class”, according to Check out the latest Blockware Solutions Market Intelligence newsletter.

Bitcoin monthly returns.Source: Blockware Solutions

Bitcoin continues to trade In an increasingly narrow trading range, the range is gradually being squeezed to the downside as pressures on the global economy intensify.

Whether or not prices continue to move lower is a hot topic of debate among crypto analysts, with the prevailing view now pointing to further downside.

Analysts will remain bearish until $45,000 is reclaimed

According to Blockware Solutions, as long as BTC is trading below the $45,000 to $47,000 range, there are multiple indicators that point to a bearish outlook.

This includes Bitcoin starting 2022 at $46,200 and the 180-week exponential hull moving average giving more weight to recent price action, suggesting Bitcoin’s timing is down, currently at $47,166.

BTC/USD 1-week chart with 180-week exponential hull moving average.Source: Blockware Solutions

Short-term holders, defined as those who have been in the market for less than 155 days, were particularly hard hit by the market weakness, with a current short-term holder cost base of $45,038.

Taken together, these data points suggest that sentiment towards BTC will remain bearish as long as the price is below $45,000.

related: Bitcoin price nears key support level to avoid ‘south’

Where is the bottom?

Despite the pessimistic analysis at the moment, there are some signs that the market may be looking for a bottom.

according to In a recent Glassnode Uncharted newsletter, following Bitcoin’s price drop below $30,000 in early May, “network activity increased as more supply changed hands and the network devalued.”

Bitcoin entity adjusted NVT.Source: unknown

According to Glassnode,

“Historically, this phenomenon has signaled a huge buying opportunity.”

To further support the claim that Bitcoin is currently in good buying territory, the report points to the entity’s adjusted dormant stream, which has been consolidating in an area previously thought to be the best buying zone.

Bitcoin entities adjust dormancy streams and Bitcoin entities adjust dormancy.Source: unknown

Likewise, Blockware Solutions saw several data points suggesting the market may be looking for a bottom, including the Mayer Multiple, an indicator that compares current market prices to a 200-day moving average, which is currently “close to some of the lowest readings on record. “

Bitcoin Mayer Multiples.Source: Blockware Solutions

While multiple data points confirm that the crypto market is in a bear market, there are signs that seller exhaustion may have reached its limit and the market is looking for a bottom. Where it will eventually be found remains unknown, but several indicators currently point to solid support around $21,000.

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