In the crypto ecosystem, pinpointing the exact moment when Bitcoin (BTC) prices bottomed is like finding a needle in a haystack. However, recent data allows us to know whether the price of Bitcoin has reached a bottom.
As the digital currency hit a one-month low of $58,500, analysts from CryptoQuant and Glassnode revealed four crucial indicators to watch. These indicators could be useful for analyzing market behavior near low points and understanding the conditions necessary for rebounds and price increases.
1. Tracking Bitcoin Demand Growth
The first quarter of 2024 saw a remarkable increase in demand for Bitcoin, coinciding with the launch of spot ETFs in the United States, setting record levels. However, after May, this demand saw a significant slowdown.
It is essential to observe demand from permanent holders to determine whether Bitcoin has bottomed out. Permanent holders are now purchasing at a rate of 72,000 Bitcoins per month.
However, demand is significantly lower than in early 2024. A return to these levels is essential for a sustainable rise in prices.
Bitcoin demand from permanent holders. Source: CryptoQuant
Besides the demand side, Glassnode’s analysis reveals important insights into the behavior of long-term holders (LTH), who also play a crucial role on the supply side. LTHs typically distribute coins and make profits during bull markets, helping to establish market cycle highs.
Currently, the market is experiencing a regime in which LTH disinvestment is moderate. This indicates a move towards equilibrium rather than euphoria, which is a phase where unrealized profits from LTH exceed 250%. High profits motivate LTHs to sell BTC aggressively, marking a market high.
The current equilibrium phase suggests that while LTHs are not yet ready to shed their holdings en masse, they are also not accumulating at a sustained rate, thus providing a balanced supply dynamic in the market.
2. Evaluate merchant profitability
Another indicator is the profitability of traders. Currently, on-chain unrealized margins for traders are negative, suggesting reduced selling pressure but not necessarily preparation for a price rebound.
For a bullish signal, these margins must become positive and exceed their 30-day simple moving average.
The Bitcoin on-chain trader realized the price and profit/loss margin. Source: CryptoQuant
3. Assessment of stablecoin liquidity
Tether’s USDT market cap growth is an indicator of liquidity in the cryptocurrency market. After peaking at $12.6 billion in late April, growth over the past 60 days has slowed significantly to just $2.5 billion, the slowest pace since November 2023.
An acceleration of stable coin liquidity is essential for Bitcoin prices to rally. This will provide the market with the influx of capital needed to support higher price levels.
Evolution of the market capitalization of USDT and the price of Bitcoin. Source: CryptoQuant
4. Monitoring the Ultimate Bitcoin Price Support Level
The final indicator to watch is Bitcoin’s support level, currently pegged at $56,000 based on Metcalfe’s valuation bands.
This level has historically acted as both resistance and support during previous cycles. It also provided support for Bitcoin when its price fell to around $56,500 in May 2024. A decline below this critical support could signal a significant market correction, while holding above this level could suggest that the market has bottomed out.
Metcalfe Bitcoin Price Rating Bands. Source: CryptoQuant
Amid these technical indicators, social sentiment is also showing signs that the market may believe the bottom has been reached. Santiment’s analysis highlighted an increase in social volume and a dominance of the term “low”, suggesting a growing belief among investors and traders that the price of Bitcoin may not fall further.
However, the market often tends to go against retailer sentiments. Therefore, traders and investors should carefully consider the nuances and conduct their own research before building new positions in the market.
