Bitcoin on-chain data shows 5 reasons why the BTC bottom may be in

After a whirlwind November for Bitcoin (BTC), certain price metrics on the chain and Bitcoin suggest that BTC’s bottom could happen in December. In Capriole Investments’ latest report, they provide analysis that Bitcoin is bottoming out. Factoring in realized value, miner capitulation, mining electrical costs, drawdown and hodler count registration, a BTC floor of $16,600 – $16,950 appears to be forming.

Here are five reasons why Edwards believes the Bitcoin price is nearing a cycle bottom.

SLRV band is flashing with a buy signal

SLRV Ribbons track investment flows by combining 30-day and 150-day moving averages into the SLRV ratio, which is a percentage of Bitcoin moved in 24 hours divided by BTC held for 6-12 months.

According to Charles Edwards, the SLRV bands outperform the BTC HODL strategy, making it a strong indicator of where the BTC price may be headed.

While the SLRV bands have been bearish through 2022, the recent move to $16,600 turned the indicator bullish. According to Edwards, the change creates a buy signal for investors and institutional funds still in the market, thus building a strong case for Bitcoin’s price floor.

The BTC price falls below the global electric cost

Although it is well known that a large number of Bitcoin miners are currently operating at a loss, this is not a rare phenomenon throughout BTC’s history.

Bitcoin miners’ total production costs include mining hardware, operating costs, capital costs, variable rate power contracts and other factors, while the electrical cost only considers the raw electricity used to mine BTC.

The raw electrical cost has historically been a Bitcoin floor because it is rare for BTC to trade below this price point. Historically, Bitcoin has only traded below the electrical cost four times, the last being on November 10 when Bitcoin’s electrical cost reached $16,925.

BTC miner sales peak

Miners are still losing money with production costs above the spot price of Bitcoin. This dichotomy forces miners to sell Bitcoin to stay afloat.

The current level of Bitcoin miner selling is the third largest in history, with the other two events occurring when BTC was $2.10 in 2011 and $290 in 2015.

In hindsight, investors will want those prices back, and Edwards suggests that the current BTC price may represent a similar value.

Bitcoin Hash Ribbons Confirm Another Miner Capitulation

Bitcoin miner capitulation involves miners shutting down their ASICs that are no longer profitable and selling part of their Bitcoin reserves to cover expenses.

According to Capriole Investments, during miner capitulations, a price floor is formed before the hash rate starts to improve. As mentioned in the chart below, another miner capitulation happened on November 28th, and if the analysis is correct, this will put Bitcoin’s bottom at around $16,915 since the hash rate has started to rise after the November 28th date.

Related: Bitcoin clings to $17K as ARK flags ‘historically significant capitulation’

All-time high Bitcoin hodling despite a historic price decline

One metric used to analyze Bitcoin hodler behavior is the NUPL (Long-term Holder Net Unrealized Profit and Loss) tracker.

Throughout Bitcoin’s history, the NUPL metric has only shown such a large decline on four occasions.

The previous occasions that witnessed such large drawdowns represented value purchases of Bitcoin for investors. Edwards suggests that if investors see the BTC price as undervalued, their choice to accumulate could further strengthen Bitcoin’s floor.

Another trend is forming as the long-term hodler calculation hits top numbers. Currently, 66% of Bitcoin’s supply is in the hands of long-term hodlers, meaning they have held their Bitcoin for over a year.

According to Edwards, this behavior is in line with changing macro markets.

We have an all-time high in long-term holdings. Those who have held Bitcoin for at least 1 year now represent more of the network than ever before, 66%. Previous peaks of long-term inventory were all aligned with tough bear markets. pic.twitter.com/4IXnUg5f3S

— Charles Edwards (@caprioleio) 6 December 2022

While the markets remain highly correlated to equities and vulnerable to macro market changes, several data points suggest that Bitcoin may be in the final stages of a bottoming process.