- The price of BTC has once again entered the $26,000 range.
- CryptoQuant analyst Dan Lim opined that a market bottom has been reached.
This is reported by the pseudonymous CryptoQuant analyst Dan Limewhile variables such as recession and regulatory action in the US could affect the cryptocurrency market, the Bitcoin [BTC] market has bottomed out and is entering a new bull cycle.
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Lim reviewed BTC’s Spent Output Profit Ratio (SOPR) for short-term investors. It found that when the king coin market bottoms out, the unrealized profit/loss ratio falls below -0.18. This indicates that a significant amount of BTC is being held at a loss until the market bottoms out.
Conversely, during peaks in the bull market, the SOPR indicator “rises in the short term”. This suggests that this cohort of BTC holders (investors who have held for less than six months) have moved on to coin distribution.
According to Lim:
“Not only have short-term investors not been very profitable lately, but from a cycle standpoint,[the]recent bull period since the bottom in November 2022 has been less than 6 months.”
Source: CryptoQuant
Is Bitcoin price recovery on the horizon?
At the time of writing, BTC switched hands at $26,882.14 after fluctuating between the $27,000 and $27,800 price range for a few weeks. Traders have become increasingly wary of a possible pullback to $20,000 to $25,000.
According to data from Sanitation, BTC’s social dominance, evidenced by its prominence in online discussions, has skyrocketed. This is often a sign of fear among traders, indicating an increased likelihood of a price recovery.
When BTC’s price hit $27,000 again during intraday trading hours on May 18, its social dominance immediately climbed more than 50%. At the time of writing this was 28.34%.
Source: Sentiment
Furthermore, data from Santiment’s Trending Keywords dashboard showed that the trending keywords over the past 10 hours were related to hardware wallets and security. According to Santiment, a clear indication of fear in the crypto market is when most of the popular keywords revolve around hardware wallets and security.
This reflects security concerns raised by traders following the unexpected collapse of cryptocurrency exchange FTX in November 2022, which ultimately marked a low point for the market.
🔐 One of the main signs of anxiety is when the top is trending #crypto keywords are almost all related to hardware wallets & security. We saw similar security concerns from traders in November 2021 after the @FTX_Official to collapse. That marked a market bottom. https://t.co/0MIfQq1TSd pic.twitter.com/nFIeAwmVPf
— Santiment (@santimentfeed) May 19, 2023
What the statistics say
While the above datasets may indicate a possible price recovery, one key price floor indicator at the time of writing did not suggest the same. This was BTC’s Network Profit/Loss (NPL) ratio.
This statistic tracks the average profit or loss of all coins that change addresses daily to record the holder’s periods of profit-taking or capitulation on the chain. NPL dips are usually a sign that an asset’s price is bottoming out.
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According to Sanitationthis is because they suggest ‘short-term capitulation of ‘weak hands’ and the return of ‘smart money’, and therefore coincide with local bounce backs and periods of price recovery.
No such dips have occurred in the current BTC market.
Source: Sentiment
