bitcoin (BTC) may be bottoming out after gaining 25%, based on several market signals.
The price of BTC rose around 25% after falling to around $17,500 on June 18. The upward retracement came after a 75% correction, measured from its November 2021 high of $69,000.
The recovery, however, appears modest and carries downside continuation risks due to the prevailing macroeconomic headwinds (rate hikeinflation, etc.) and the collapse of many top crypto companies such as Capital of the Three ArrowsTerra and others.
But some widely followed indicators paint a different scenario, suggesting that Bitcoin’s downside prospects from current price levels are minimal.
That big “oversold” bounce
The first sign of Bitcoin’s macro bottom comes from its weekly Relative Strength Index (RSI).
Notably, BTC’s weekly RSI turned “oversold” after falling below 30 during the week of June 13. This is the first time the RSI has slipped into the oversold region since December 2018. Interestingly, Bitcoin had ended its bearish rally in the same month. and rose over 340% over the next six months to $14,000.
In another instance, Bitcoin’s weekly RSI dipped toward 30 (if not below) during the week beginning March 9. This also coincided with the price of BTC bottoming below $4,000 and then rising to $69,000 in November 2021, as shown below.
Bitcoin price has similarly rebounded since June 18, opening the door for a potential repeat of its history of parabolic rallies after an “oversold” RSI signal.
Bitcoin NUPL jumps above zero
Another sign of a potential Bitcoin macro bottom comes from its net unrealized profit and loss (NUPL).
NUPL is the difference between market capitalization and realized capitalization divided by market capitalization. It is represented as a ratio, where a reading above zero means investors are in profit. The higher the number, the more investors are in profit.
Related: Bitcoin must close above $21.9,000 to avoid another BTC price crash – trader
July 21, Bitcoin NUPL spiked above zero as the price hovered around $22,000. Historically, such a reversal has followed large BTC price increases. The table below illustrates the same.
Mining profitability
The third sign of Bitcoin forming a macro bottom comes from another on-chain indicator called Puell Multiple.
The Puell Multiple examines the profitability of mining and its impact on market prices. The indicator does this by measuring a ratio of daily coin issuance (in USD) and the 365 moving average of daily coin issuance (in USD).
A strong reading of Puell Multiple shows that mining profitability is high compared to the yearly average, suggesting that miners would liquidate their Bitcoin cash to maximize revenue. As a result, a higher Puell Multiple is known to coincide with macro highs.
Conversely, a lower Puell Multiple reading means that the current profitability of miners is below the annual average.
Thus, platforms whose revenues from Bitcoin mining are at breakeven or below zero are at risk of shutting down, ceding market share to more competitive miners. Evicting weaker miners from the Bitcoin network has historically reduced selling pressure.
Interestingly, the July 25 Puelle multiple reading is within the green box and is similar to levels seen during the March 2020 crash, 2018 and 2015 price lows.
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