Bitcoin [BTC] showed a sell signal at $95,000 a month ago and has been trading within a sharp declining channel since then. The downtrend strengthened to $90,000, pushing prices to a low of $60,000 before a partial recovery and continued consolidation took place.
At the time of writing, BTC was trading at $66,988, down 1.75% on the daily charts and 46% from $126,000 ATH. Despite this prolonged market weakness, analysts remain optimistic and see an end in sight.
Bitcoin: Key Metrics Flash Cycle Bottom
With the market under bearish pressure, Bitcoin appears to have reached its maximum pain zone.
According to CryptoRusBitcoin’s Sharpe Ratio dropped to -38 in the short term. Such low levels have only appeared at major cycle bottoms, including 2015, 2019 and late 2022.
Source: CryptoQuant
During these cycles, the decline meant major exhaustion among sellers, with fewer or no sellers willing to continue dumping. As such, a low Sharpe Ratio coincides with the end of selling pressure, not the start of a long-term bear market.
Therefore, when this measure reaches these levels, it has signaled a cycle bottom; in In 2015, 2019 and 2022, extremely negative figures were followed by an aggressive recovery.
In addition, two other key numbers have indicated a potential bottom in the cycle. For starters, Bitcoin’s scarcity climbed to a new all-time high.
Bitcoin’s Stock to Flow Ratio (SFR) rose from 127 to 261, hitting a new high. When SFR reaches such high levels, it indicates that supply has decreased dramatically.
Source: Santiment
So despite a prolonged downward trend, holders are not selling aggressively and buyers remain very active in the market. Often the severe scarcity puts pressure on the market supply, positioning the market for an upward movement.
Finally, Bitcoin’s MVRV ratio (Z-score) fell to its 2023 low, reaching a low of $0.445 at the time of writing. With the MVRV Z-score hitting such lows, it suggests that BTC is well below its historical cost basis.
At current levels, sentiment is extremely bearish; For example, weak hands sell at a loss, smart money rises and illiquid supply increases. These classic wealth transfers preceded the market recovery.
What’s next for BTC?
Despite key data pointing to a cycle bottom, the market structure remains relatively weak and overly bearish. As such, sellers remain active, while big buyers sit on the sidelines.
As a result, weakened demand has pushed Bitcoin’s Relative Strength Index (RSI) deep into bearish territory, near the oversold level. With an RSI value of 32, selling pressure remains dominant while demand remains low.
At the same time, the DMI trend has been trending downward for 30 consecutive days.
Source: TradingView
Such market conditions indicate prolonged weakness. If selling pressure continues as smart money is pushed aside, BTC will hover around $70,000 and $65,000.
However, if these metric signals hold, and this is the bottom, BTC will break these levels, turning around $70,000 and targeting $90,000.
Final summary
- Bitcoin fell 1.75% to $66,988, continuing the bearish trend.
- BTC’s Sharpe ratio fell to -38 levels historically associated with cycle bottoms.