A Bitcoin (BTC) on-chain indicator that tracks the amount of coin supply held by long-term holders (LTH) in losses is signaling that a market bottom could be near.
Extremely accurate Bitcoin bottom expert
As of September 22, approximately 30% of Bitcoin LTHs have faced losses due to BTC’s decline from $69,000 in November 2021 to around $19,000 now. That’s about 3%–5% below the level that previously coincided with Bitcoin’s market bottoms.
For example, in March 2020, Bitcoin price dropped below $4,000 amid the market crash led by COVID-19, which occurred when the amount of BTC supply held by LTH in loss climbed to 35%, as shown below.
Similarly, Bitcoin’s December 2018 bottom of around $3,200 coincided with the LTH loss metric increasing over 32%. In both cases, BTC/USD followed by entering a long bullish cycle.
Therefore, the number of LTHs in loss during a typical bear market tends to peak in the 30%-40% range. In other words, the price of Bitcoin still has room to fall – probably into the range of $10,000–$14,000 – for “LTHs in loss” to reach the historical lower zone.
Coupled with the LTH supply metric, which tracks the BTC supply held by long-term holders, it appears that these investors accumulate and hold during market downturns and distribute during BTC price rises, as illustrated below.
Therefore, the next bull market may begin when total supply held by LTHs begins to decline.
Bitcoin rally is strong
Meanwhile, the number of cluster addresses has steadily increased during the current bear market, data shows. The metric tracks addresses that have “at least two incoming non-dust transfers and have never spent funds.”
Interestingly, this is different from the previous bear cycles, which saw the number of hoarding addresses decrease or remain flat, as shown in the chart above, suggesting that “hodlers” are unconcerned by current price levels.
In addition, the number of addresses with a non-zero balance is about 42.7 million against 39.6 million at the beginning of this year, showing consistent user growth in a bear market.
BTC price technicals suggest more downside
Bitcoin, however, is struggling to recover $20,000 as support in a higher interest rate. Its correlation with US stocks also suggests more downside in 2022.
Related: Bitcoin analysts give 3 reasons why BTC price below $20K may be a ‘bear trap’
From a technical perspective, Bitcoin could fall further to $14,000 in 2022 if its cup-and-handle breakdown pans out, as shown below.
Such a move should push the aforementioned “LTH in loss” metric to the 32%-35% capitulation region, which could ultimately coincide with the bottom in the current bear market.
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