The on-chain Bitcoin (BTC) indicator, which tracks the amount of coins that long-term holders of coins (LTHs) are holding in losses, indicates that a market bottom may be near.
A frighteningly accurate Bitcoin analyzer
As of September 22nd, approximately 30% of Bitcoin LTHs were experiencing losses due to BTC dropping from $69,000 in November 2021 to around $19,000 now. This is about 3% to 5% below the level that previously coincided with the bottoms of the Bitcoin market.
For example, in March 2020, the price of Bitcoin plunged below $4,000 amid the COVID-19-led market crash, which occurred when the amount of BTC supply held by LTH surged at a loss of about 35%, as shown below.
The long-term bitcoin holder has experienced losses. Source: Glassnode
Likewise, Bitcoin’s December 2018 bottom at around $3,200 agrees with LTH’s loss scale rising above 32%. Either way, the BTC/USD pair continued to enter a long bullish cycle.
Hence, the number of LTHs in loss during a typical bear market tends to peak in the 30%-40% range. In other words, bitcoin price still has plenty of room to fall – likely to reach the $10,000-$14,000 range – in order to “lose in LTH” to reach the historical bottom.
Along with the LTH supply metric, which tracks the supply of BTC held by long-term holders, these investors appear to accumulate and hold during market downturns and distribute during BTC price uptrends, as shown below.
The total supply of Bitcoin held by LTH. Source: Glassnode
Therefore, the next bull market may start when the total supply held by LTHs starts to decline.
Strong Bitcoin Accumulation
Meanwhile, the number of accumulating titles is constantly increasing during the current bear market, the data shows. Tracks metric addresses with “At least two incoming transfers without dust and never spent money”.
The number of bitcoin accumulating addresses. Source: Glassnode
Interestingly, this differs from previous bear cycles that saw the number of accumulating titles drop or remain flat, as shown in the chart above, indicating that “scammers” are unfazed by current price levels.
In addition, the number of addresses with a non-zero balance is about 42.7 million, compared to 39.6 million at the beginning of this year, which shows a steady growth of users in a bear market.
The number of bitcoin addresses with a non-zero balance. Source: TradingView
BTC price technical hints at further downside
However, Bitcoin is struggling to regain $20,000 as support in a higher interest rate environment. Its correlation with US stocks also points to a further decline in 2022.
Related: Bitcoin Analysts Offer 3 Reasons Why BTC Price Below $20,000 Is a ‘Bear Trap’
From a technical perspective, Bitcoin could drop further towards $14,000 in 2022 if the cup and handle collapse stops, as shown below.
BTC/USD 3-day price chart featuring a cup and handle pattern. Source: TradingView
Such a move should push the aforementioned “LTH at Loss” metric towards the 32%-35% surrender zone, which could eventually coincide with the bottom in the current bear market.
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