3 Signs Bitcoin Price Is Forming a Potential ‘Macro Bottom’
Bitcoin (BTC) may be about to bottom after gaining 25%, based on several market signals.
BTC’s price has risen about 25% after falling to around $17,500 on June 18. The upside came after a 75% correction measured from the November 2021 high of $69,000.
However, the rally appears modest, and carries bearish continuation risks due to prevailing macroeconomic headwinds (interest rate hikes, inflation, etc.) and the collapse of many high-profile crypto firms such as Three Arrows Capital, Terra and others.
But some widely tracked indicators paint a different scenario, suggesting that Bitcoin’s downside prospects from current price levels are minimal.
The big “oversold” bounce
The first sign of Bitcoin’s macro bottom comes from its weekly Relative Strength Index (RSI).
In particular, BTC’s weekly RSI was “oversold” after falling below 30 in 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 bear market rally in the same month and rallied over 340% over the next six months to $14,000.
In another case, Bitcoin’s weekly RSI fell towards 30 (if not below) in the week starting March 9, 2020. It also coincided with BTC’s price bottoming below $4,000 and then rising to $69,000 by November 2021, as shown below.
Bitcoin price has retraced similarly since June 18, opening the door to potentially repeat history with parabolic rallies following an “oversold” RSI signal.
Bitcoin NUPL jumps above zero
Another sign of a potential Bitcoin macro bottom comes from the Net Unrealized Profit and Loss (NUPL) indicator.
NUPL is the difference between market value and realized value divided by market value. It is represented as a ratio, where a reading above zero means investors are in profit. The higher the number, the more investors make money.
Related: Bitcoin Needs to Close Above $21.9K to Avoid Another BTC Price Crash – Trader
On July 21, Bitcoin NUPL climbed above zero as the price hovered around $22,000. Historically, such a flip has been followed by large BTC price gains. The diagram below illustrates the same.
Mining profitability
The third sign that Bitcoin is forming a macro bottom comes from another chain indicator called the Puell Multiple.
Puell Multiple examines profitability in mining and its impact on market prices. The indicator does this by measuring the ratio of daily coin issuance (in USD) to the 365-day moving average of daily coin issuance (in USD).
A strong Puell Multiple reading shows that mining profitability is high compared to the annual average, suggesting that miners will liquidate the Bitcoin treasury to maximize earnings. As a result, a higher Puell multiple is known to coincide with macropeaks.
Conversely, a lower Puell Multiple reading means that the miners’ current profitability is below the annual average.
Thus, rigs with break-even or below zero revenues from mining Bitcoin will risk shutting down, giving up market share to more competitive miners. The expulsion of weaker miners from the Bitcoin network has historically reduced selling pressure.
Interestingly, the Puelle Multiple reading as of July 25 is in the green box and is similar to levels observed during the March 2020 crash, as well as the 2018 and 2015 price lows.
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