Six out of eight indicators monitored by analysts at crypto data analytics platform Glassnode to identify when Bitcoin is breaking out of a bear market are giving off flashing bullish signals, and a seventh should also turn green soon. Glassnode’s “Bitcoin Bear Recovery” indicator dashboard aims to help Bitcoin investors identify when the Bitcoin The market is moving towards a healthier trend by observing a mixture of on-chain, technical and network fundamental indicators.
Historically, at least 5 of these indicators flash green when Bitcoin prices increase. Meanwhile, when all eight indicators start showing bullish signals, it has always been a great buy signal. Conversely, when less than five of these lights flash green, Bitcoins the price is generally in a long-term decline. Light blue indicates periods when at least five out of eight bullish conditions have been met. Dark blue indicates periods when all eight are fulfilled.
Signals 1 and 2: Spot prices are trading above key pricing patterns
Glassnode groups these indicators into four categories. The first is whether or not Bitcoin is trading above the main pricing patterns – the 200-day simple moving average (SMA) and the realized price, which is an on-chain indicator that shows the average price of the last move of every bitcoin on the network. (the average price wallets “paid” for their Bitcoins when they received them).
With Bitcoin’s 200DMA at around $19,600 and its realized price at around $19,800, Bitcoin recently moved back north of these two key levels for the first time since December 2021. So both are flashing green.
Signal 3 and 4: Network usage increases
The 30-day SMA of new addresses has recently exceeded its 200-day SMA and is therefore flashing green. This has historically happened at the beginning of the bull markets.
Meanwhile, the fee revenue multiple still has a negative 2-year Z-score of around -0.33. The Z score is the number of standard deviations above or below the mean of a sample of data. In this case, the Glassnode Z-score is the number of standard deviations above or below the average Bitcoin fee income of the last 2 years.
This LED therefore still does not flash green. However, as history shows, this can change very quickly.
Signals 5 and 6: market profitability returns
The 30-day simple moving average (SMA) of the Bitcoin Realized Profit-Loss Ratio (RPLR) indicator recently broke above one for the first time last April. This means that the Bitcoin market makes a greater proportion of profits (denominated in USD) than losses.
According to Glassnode, “this usually means that sellers with unrealized losses have been exhausted and a healthier inflow of demand exists to absorb profit taking.” Therefore, this indicator sends a bullish sign.
Meanwhile, although the Spent Output Adjusted Profit Ratio (aSOPR), an indicator that reflects the degree of profit and loss made for all coins moved on-chain, remains below 1 (indicating that the market is not is not in profit yet), it is fast moving higher and looks likely to cross 1 soon. It was last at 0.988.
This is the seventh indicator that is not yet sending a bullish signal, but will likely be soon. Looking back on the last eight years of Bitcoin’s history, aSOPR rising above 1 after an extended period below was a fantastic buy signal.
Signals 7 and 8: BTC balance shifted in favor of HODLers
The Bitcoin Realized HODL Multiple has been trending upwards over the past 90 days, a bullish sign according to Glassnode. The crypto analytics firm says that “when the RHODL Multiple moves into a bullish trend over a 90-day window, it indicates that USD-denominated wealth is beginning to reorient into new demand flows.” This “indicates that profits are being taken, that the market is able to absorb them… (and) that longer-term holders are starting to spend coins,” says Glassnode.
Glassnode’s final indicator in its Bitcoin Bear Recovery dashboard is whether the 90-day exponential moving average (EMA) of Bitcoin’s supply in profit has been in an uptrend over the past 30 last days or not. Bid-in-profit is the number of Bitcoins that were last moved when USD-denominated prices were lower than they are now, implying that they were bought at a lower price and the wallet retains a paper profit. This indicator also flashes green.
So are we in a Bitcoin bull market?
2022 macro headwinds seem to subside. Inflation in the United States is rapidly falling to more acceptable levels and, with the US economy coming to a halt according to recent survey data and corporate earnings, the bond market assessment that the Fed won’t be able to tighten rates much more in 2023 sounds like an increasingly sharp call.
This narrative has been a key driver of Bitcoin’s 2023 rally so far, and many believe it could still support its price in the months ahead. While some continue to deride the latest move higher as another bear market rally, the aforementioned indicators in the Glassnode Dashboard suggest that this latest move higher may well be something more.
And these are not the only on-chain indicators that signal an incoming bull market. According to analysis posted on Twitter by @GameofTrade_, 6 on-chain metrics including Accumulation Trend Score, Entity-Adjusted Dormancy Flow, Reserve Risk, Realized Price, Z MVRV Score and Puell’s multiple “call for a long-term generational buying opportunity”.
Elsewhere, the widely followed Bitcoin Fear & Greed Index recently returned to neutral territory (i.e. above 50) for the first time after a prolonged period of fear and extreme fear. A sustained recovery towards neutral often occurs at the start of the next Bitcoin bull market, such as in early 2019, and then again in mid-2020.
Analysis from the crypto-focused Twitter account @CryptoHornHairs made a jaw-dropping observation that Bitcoin is tracking almost exactly in the footsteps of a nearly four-year market cycle that it has been tracking for more than eight years. After hitting bottom last November, Bitcoin could rally for nearly 1,000 more days, the analysis suggests, before entering its next bear market in 2025.
A widely followed Bitcoin pricing model sends a similar story. According to the Bitcoin Stock-to-Flow pricing model, the Bitcoin market cycle is approximately four years, with prices typically bottoming out near the middle of the four-year gap between “halvings” – the halving halving of Bitcoin is a four-year phenomenon. where the mining reward is halved, thereby slowing the inflation rate of Bitcoin. Past price history suggests that Bitcoin’s next big push will come after the next halving in 2024.