A Bitcoin (BTC) on-chain indicator, which tracks the amount of coin supply held by long-term holders (LTH) in losses, indicates that a market bottom could be close.
Eerily Accurate Bitcoin Bottom Expert
As of September 22, about 30% of Bitcoin’s LTHs suffered losses as a result of BTC’s decline from $69,000 in November 2021 to about $19,000 today. That’s about 3% to 5% below the level that previously coincided with Bitcoin’s market bottoms.
For example, in March 2020, Bitcoin price dropped below $4,000 during the COVID-19-led market crash, which occurred when the amount of BTC supply that held LTH as a loss climbed to 35% as shown below.
Similarly, Bitcoin’s December 2018 bottom of around $3,200 matched the LTH loss stat that topped 32%. In both cases, BTC/USD followed by entering a long bullish cycle.
Hence, the number of LTHs taking a 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 – likely in the $10,000-$14,000 range – for “LTHs in loss” to hit the historic bottom zone.
Coupled with the LTH delivery metric, which tracks BTC supply from long-term holders, it appears that these investors accumulate and hold during market declines and disperse during BTC price surges, as illustrated below.
Therefore, the next bull market may begin when the total supply of LTHs begins to decline.
Bitcoin accumulation is strong
Meanwhile, the number of accumulation addresses has steadily increased during the current bear market, data shows. The metric tracks addresses that “have at least two incoming non-substance transfers and have never spent money.”
Interestingly, this differs from the previous bear cycles where the number of accumulation addresses fell or stayed the same, as shown in the chart above, suggesting that “hodlers” are unimpressed by the current price levels.
In addition, the number of addresses with a non-zero balance is around 42.7 million versus 39.6 million at the start of this year, demonstrating consistent user growth in a bear market.
Technical data on BTC prices point to more downside
Bitcoin nevertheless struggles to recover $20,000 as support in a higher interest rate environment. The correlation with US equities also points to a further downward trend in 2022.
Related: Bitcoin Analysts Give 3 Reasons Why BTC Price Below $20K Could Be a Bear Trap
From a technical perspective, Bitcoin could fall further to $14,000 in 2022 if the head and handle breakdown expands, as shown below.
Such a move should push the aforementioned “LTH in Loss” metric toward the 32%-35% capitulation region, which could eventually coincide with the bottom in the current bear market.
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