After a November whirlwind for bitcoin (BTC), certain on-chain and bitcoin price metrics are suggesting that BTC’s bottom could be reached in December. In the latest Capriole Investments report, they offer an analysis of how Bitcoin is finding the bottom. Taking into account realized value, miner capitulation, mining electricity costs, downdraw and record hodler numbers, a BTC bottom of $16,600 – $16,950 appears to have formed.
Here are five reasons Edwards thinks bitcoin price is nearing a cycle bottom.
SLRV Ribbons flash a buy signal
The SLRV bands track investment flows by combining the 30-day and 150-day moving averages with the SLRV ratio, which is a percentage of Bitcoin moved in 24 hours divided by BTC held for 6-12 months.
Bitcoin SLRV tapes. Source: Glassnode
According to Charles Edwards, the SLRV Ribbons are outperforming the BTC HODL strategy, making it a strong indicator of where BTC price may be headed.
While the SLRV Ribbons have been bearish throughout 2022, the recent move to $16,600 flipped the indicator bullish. According to Edwards, the change creates a buy signal for investors and institutional funds still in the market, making a strong case for Bitcoin’s price floor.
BTC price falls below its global electricity cost
While it is known that a large proportion of Bitcoin miners are currently operating at a loss, this is not an uncommon phenomenon in BTC’s history.
Total production costs of bitcoin miners include mining hardware, operational costs, capital costs, variable rate electricity contracts and other factors, while electricity costs only consider the raw electricity used to mine BTC.
Bitcoin production costs and BTC electricity costs. Source: Glassnode
Raw electricity costs have historically been a Bitcoin bottom as it is rare for BTC to trade below this price point. Historically, bitcoin has only traded below the cost of electricity four times, most recently on Nov. 10 when bitcoin’s cost of electricity hit $16,925.
BTC miner sales peak
Miners still lose money when production costs are higher than Bitcoin’s spot price. This dichotomy is forcing miners to sell bitcoin to stay afloat.
The current sale level from bitcoin miners is the third largest in history, with the other two events occurring when BTC was at $2.10 in 2011 and $290 in 2015.
Miner BTC selling pressure, top events. Source: TradingView
In hindsight, investors would like those prices back, and Edward’s suggests that the current BTC price may represent similar value.
Bitcoin hash ribbons confirm another miner capitulation
When bitcoin miners capitulate, miners shut down their no-longer-profitable ASICs and sell portions of their bitcoin reserves to cover costs.
According to Capriole Investments, a floor price forms during miner capitulation before the hash rate begins to improve. As noted in the chart below, another miner capitulation occurred on November 28th and if the analysis is correct this would bring Bitcoin’s bottom to around $16,915 as the hash rate increased after November 28th has started to rise.
Bitcoin mining hash bands. Source: TradingView
Related: Bitcoin Holds $17,000 as ARK Announces “Historically Significant Capitulation”
Bitcoin hodling at all-time high despite historic price decline
One metric used to analyze bitcoin hodler behavior is the Long-Term Holder Net Unrealized Profit and Loss (NUPL) tracker.
In the entire history of Bitcoin, the NUPL metric has only shown such a large decline four times.
Bitcoin NUPL metric. Source: Glassnode
The previous occasions that saw such large moves down have been valuable bitcoin purchases for investors. Edwards suggests that if investors view BTC price as undervalued, their decision to accumulate may further solidify Bitcoin’s bottom.
Another trend is forming as the long-term Hodler metric spikes. Currently, 66% of the bitcoin supply is in the hands of long-term hodlers, meaning they have held their bitcoin for over a year.
According to Edwards, this behavior is aligned with changing macro markets.
We have an all-time high in long-term hodling. Those holding Bitcoin for at least 1 year now represent more members of the network than ever before, 66%. Previous long-term hold peaks have all coincided with the tough markets. pic.twitter.com/4IXnUg5f3S
— Charles Edwards (@caprioleio) December 6, 2022
While markets are still highly correlated with stocks and vulnerable to macro market shifts, multiple data points suggest Bitcoin may be in the final stages of a bottoming process.
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.