3 reasons why Bitcoin price has bottomed out — expert

Bitcoin bottomed out, 3 reasons why Bitcoin price has bottomed out — expert
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YEREVAN (CoinChapter.com) – Mikołaj Zakrzowski, the founder of the analytical platform StackSmartly, asserted that Bitcoin “most probably already bottomed out,” citing a confluence of numerous long-term metrics.

#1 MVRV says Bitcoin bottomed out

The expert relied on a metric dubbed the Market Value/Realized value, or MVRV Ratio, as the first cue of the bullish reversal.

Bitcoin bottomed out, 3 reasons why Bitcoin price has bottomed out — expert
MVRV indicates Bitcoin bottomed out. Source: Mikołaj Zakrzowski/Twitter.com

As CoinChapter covered earlier, the metric compares Bitcoin’s current Market Value to its ‘fair’ value.

The latter is calculated using standard deviation, which pulls out the extremes in the data between Market Value and Realized Value. In detail, the Market Value (MV) reflects the current price of Bitcoin multiplied by the number of coins in circulation.

Also read: Shocking! Crypto projects raise $30.3B in funding during H1/2022 despite bear market.

Realized Value (RV) does not consider the current BTC price.

Instead, RV takes the price of each Bitcoin when it was last moved, i.e., the last time it was sent from one wallet to another. The indicator then adds up all those individual prices and calculates their average.

That average price, not the current price, is then multiplied by the total number of coins in circulation.

Also read: Stablecoin dominance dropped in July – will the crypto market recover?

The price jumps and the MVRV spikes are correlated. Thus, many analysts use MVRV to identify the bull market tops and bottoms. However, Zakrzowski pointed out that the indicator stood below 1.0, above significant support (green on the chart above).

#2 Puell Multiple on the way up

Puell Multiple (PM) is a metric that focuses specifically on Bitcoin miners and shows how mining profitability influences the BTC price action.

Bitcoin bottomed out, 3 reasons why Bitcoin price has bottomed out — expert
Bitcoin Puell Multiple. Source: Mikołaj Zakrzowski/Twitter.com

In detail, the metric examines the fundamentals of miner behavior and how it can affect the market. PM is equal to the ratio of the daily coin issuance (in USD) to its 365-day moving average (in USD). If the PM is high, current miner profitability is high compared to the yearly average. Low values indicate the opposite.

Also read: Bitcoin (BTC) Just Saw Key Technical Correction: Key Levels To Watch

Moreover, the PM correlates with the price action and peaks in unison. Thus, bottoming in Puell Multiple suggests an upcoming reversal, which plays to Zakrzowski’s bullish ‘Bitcoin bottomed out’ narrative.

#3 A ‘capitulation’ drop in NULP

Net Realized Profit/Loss (NUPL) is an on-chain indicator that shows if the market is in a state of aggregate profit or loss. To create it, unrealized losses are subtracted from unrealized profits.

The indicator is negative if Bitcoin’s unrealized losses are higher than unrealized profits.

In that case, the market is in a state of loss. The opposite is true when unrealized profits are higher than unrealized losses. The recent crypto carnage left the market, BTC in particular, in the “capitulation” phase, as marked with red on the chart below.

Bitcoin bottomed out, 3 reasons why Bitcoin price has bottomed out — expert
Net Realized Profit/Loss (NUPL) indicator. Source: Mikołaj Zakrzowski/Twitter.com

Thus, the metric also suggests an uptick on the way, supporting the previous claim.

Also read: Bitcoin struggling to close above $24k, but indicators remain optimistic.

Zakrzowski’s assertion that Bitcoin bottomed out met some resistance, as the expert has not considered the macro factors. However, he retaliated by noting the unpredictability of the world economy.

Indeed, it’s true that BTC has never experienced a recession. […] Since the macro is very unpredictable, we are talking about enormous level of complexity. That’s why I tend to focus on Bitcoin fundamentals expressed by long-term metrics.

noted the analyst in his thread.
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Bitcoin bottomed out, 3 reasons why Bitcoin price has bottomed out — expert

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