Bitcoin may have survived the worst of the shock, but the data says this is stabilization and not breakout velocity.
A Bitcoin reset on the way?
According to CryptoQuantCurrent conditions suggest a reset is underway, with Bitcoin going through a broad deleveraging phase. But even as market stress subsides, the top cryptocurrency still hasn’t hit a definitive bottom in this bear cycle.
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Analyst MorenoDV_ believes that Bitcoin’s on-chain/derivatives ‘stress cycle’ indicators are rolling over, suggesting the market is exiting an acute stress phase but not yet entering a purely bullish reversal regime. The analyst says the alignment between Bitcoin’s Short-Term Sharpe Ratio and the 30-day Buy/Sell Pressure Delta indicates one of the strongest risk/reward profiles of the current cycle, but it still calls for patience.
A stress cycle is a phase characterized by large unrealized losses, forced deleveraging, a compressed futures base and defensive positioning of options.
The analyst starts by looking at the Sharpe Ratio. The current value has fallen well into negative territory and is around -40, a level that has historically indicated major buying zones. In previous cycles (2015, 2019, 2020 and 2023), every time the ratio fell below this line, Bitcoin saw a strong price revision later.
Bitcoin Sharpe Ratio (Short Term). Source: CryptoQuant.
According to the analysis, we are now in the same red circled area shown in the graph.
The explanation of the pressure delta
According to the analyst, the buy/sell pressure delta helps explain where we are at the bottom. Bottoms don’t happen all at once: they unfold in stages.
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First, there is a big selloff (orange/red peaks below -0.05) as forced sellers and panicky investors dump their coins. Then the selling pressure slowly cools and returns to the green zone as fewer people are willing to sell. The best entries usually appear when the delta finally moves into the blue “buying pressure” zone, meaning real buying demand is returning, not just that sales have slowed.
Bitcoin: Buy/Sell Pressure Delta (30). Source: CryptoQuant.
The report claims that the heavy selling phase is likely behind us and we have entered the middle phase. The delta is recovering, but has not yet reached a strong buying area. Historically, this gap is where some of the best opportunities have arisen.
This analysis is consistent with yesterday’s QCP market color. Their report claimed that Bitcoin’s move looks more like a temporary lull than a lasting solution
There is still risk, the analyst warns. The macroeconomic backdrop, liquidity and weak sentiment could slow this down. But for investors who think in cycles, the data suggests we are closer to the beginning of a new opportunity than the end.
Yesterday, Bitcoin bounced back and reclaimed $72k. At the moment of writing, BTC trades for the low $71ks on the daily chart. Source: BTCUSD on Tradingview.
Cover image of Perplexity. BTCUSD chart from Tradingview.