Despite the bearish tone of recent weeks, Bitcoin remains [BTC] the rebound potential is maintained. Especially as critical conditions affecting price action remain unresolved.
In fact, on-chain data indicated that even though the price of cryptocurrencies has fallen, there is still no confirmation that bears have completely taken over the market. Instead, signs of continued bullish presence remain, and this could impact price dynamics as conditions evolve.
Key conditions in the chain keep Bitcoin at a crossroads
At the time of writing, Bitcoin’s Net Unrealized Profit and Loss (NUPL) metric underlined a notable dynamic that could influence the crypto’s next price move.
The Adjusted NUPL, which compares the realized capitalization of short- and long-term holders to Bitcoin’s market capitalization, has reached a level historically associated with prices exiting prolonged bearish phases.
Source: CryptoQuant
This zone, often called the fear and anxiety level, has played a role in shaping Bitcoin’s broader trend in previous cycles. However, it did not confirm a turnaround.
Instead, it suggested that bulls continue to hold their Bitcoin without realizing significant gains or losses, even if there could be accumulation.
That said, the possibility of profit or loss realization remains. If such activity occurs, it could cause further downward pressure, favoring short positions already present in the market as well as bearish participants awaiting confirmation.
As a result, Bitcoin remains at a critical inflection point – a point where neither bulls nor bears have a decisive advantage. To better assess which side could gain control, AMBCrypto also examined additional market indicators.
Risk measure for a potential shift
Bitcoin’s Sharpe Ratio, a metric used to measure risk-adjusted returns, has fallen into a zone that has historically supported price rebounds.
At the time of writing, the ratio had fallen below zero, a level reached only four times since 2018. In previous cycles, this area often preceded the formation of a market bottom.
However, such a signal did not quite identify an exact bottom. Instead, it suggested the chances of a recovery could increase. However, a prolonged decline in the Sharpe ratio remains possible and could last for months, potentially putting persistent downward pressure on prices.
Source: CryptoQuant
Exchange Reserve data also provided some additional context.
Rising foreign exchange reserves generally indicate greater selling intent as investors move assets to exchanges. On the contrary, dwindling reserves mean that investors may withdraw Bitcoin into private portfolios for longer-term investing.
Bitcoin’s foreign exchange reserves are on an upward trend and have risen from 2.71 million BTC on January 19 to 2.73 million BTC. Such an increase could indicate growing short-term selling pressure.
While the broader structure remains constructive, the short-term outlook could remain bearish until currency reserves start to trend downward.
Bitcoin Season Index is leaning towards early bull
Market seasonality remains a key determinant of investor positioning, with press time data showing a gradual tilt towards Bitcoin dominance.
For example: Bitcoin season Indexthat starts at the 25 level, was at 29 and has remained largely flat in recent sessions. Such a sideways move could signal investor indecision, with sentiment swinging between cautiously bearish and early bullish positioning.
A sustained rise from this range would signal renewed capital rotation into Bitcoin and could support a stronger upward move – reinforcing the developing bullish narrative.
Final thoughts
- Bitcoin has not yet entered a confirmed bearish phase, while key conditions that could shift momentum back to the bulls are still not met.
- The Bitcoin Season Index is approaching bullish territory and could provide additional support if momentum improves.