Bitcoin Points at “Macro Bottom”: Where Will the Fall End?

Bitcoin

Bitcoin

Here’s What you need to know about 3 indicators that Bitcoin is nearing a macro bottom

Based on market signals, Bitcoin (BTC) may be in the process of bottoming after gaining 25%. After falling to around $17,500 on June 18, the price of Bitcoin has risen roughly 25%. The upward retracement came after a 75% correction from its November 2021 high of $69,000. However, the recovery appears modest, and bearish continuation risks exist due to prevailing macroeconomic headwinds (rate hikes, inflation, etc.) and the collapse of many high-profile crypto firms such as Three Arrows Capital, Terra, and others. However, some widely followed indicators paint a different picture, implying that Bitcoin’s downside prospects from current price levels are limited.

 

The massive “oversold” bounce

The weekly relative strength index is the first indicator of Bitcoin macro bottom (RSI). Notably, after falling below 30 in the week of June 13, BTC’s weekly RSI became “oversold.” This is the first time the RSI has entered the oversold territory since December 2018. Surprisingly, Bitcoin had ended its bear market rally in the same month and had risen over 340 percent in the subsequent six months to $14,000.

In another case, Bitcoin’s weekly RSI fell to 30 (or even lower) in the week beginning March 9. This also coincided with the price of BTC falling below $4,000 and then rising to $69,000 by November 2021. Bitcoin price has rebounded similarly since June 18, potentially resuming its history of parabolic rallies following an “oversold” RSI signal.

 

Bitcoin NUPL has risen above zero

The net unrealized profit and loss (NUPL) indicator is another indicator of a potential Bitcoin macro bottom. NUPL is the difference between market capitalization and realized capitalization divided by market capitalization. It is represented as a ratio, with a reading above zero indicating that investors are profitable. The greater the number, the greater the profit for investors. When the price was around $22,000 on July 21, Bitcoin NUPL climbed above zero. Historically, such a flip has been followed by significant BTC price increases.

 

Profitability in mining

The Pull Multiple, another on-chain indicator, provides the third indication of Bitcoin forming a macro bottom. The Pull Multiple investigates mining profitability and its relationship to market prices. The indicator accomplishes this by calculating the ratio of daily coin issuance (in USD) to the 365-day moving average of daily coin issuance (in USD). A high Pull Multiple reading indicates that mining profitability is higher than the yearly average, implying that miners would liquidate their Bitcoin treasury to maximize revenue. As a result, a higher Pull Multiple is associated with macro tops.

A lower Pull Multiple reading, on the other hand, indicates that the miners’ current profitability is lower than the yearly average. As a result, rigs with break-even or negative revenue from Bitcoin mining risk being shut down, ceding market share to more competitive miners. Historically, the removal of weaker miners from the Bitcoin network has reduced selling pressure. Surprisingly, the Puelle Multiple reading as of July 25 is in the green box, which corresponds to levels seen during the March 2020 crash, 2018, and 2015 price bottoms.