Bitcoin On-Chain Supply Metrics Suggest Macro Bottom Hasn’t Come Yet

in today’s time on-chain analysisBeInCrypto watches Bitcoin supply indicator. The purpose of the analysis is to determine the phase of the bear market, whether the macro bottom has already been reached, and how long the subsequent accumulation will last.

Currently, supply in the P&L metric is reaching levels that historically correlate with macro bottoms for bitcoin price. However, they also provide clues to a subsequent multi-month accumulation phase, the completion of which we have yet to see signs of.

Furthermore, the correlation between the two types of supply suggests that BTC price could be in for another final capitulation in this bear cycle.

bitcoin supply in profit

Circulating supply in profit is a metric that indicates coins whose price was less than the current price at the time of the last move. Naturally, its all-time low is correlated with macro moves in BTC price. It is worth adding that successive market cycles profit from increasing the supply volume as the bitcoin supply itself increases due to the process of mining new coins.

During bull markets, nearly all of the supply in circulation registers a profit. In contrast, during bear markets, the profit supply steadily decreases to reach the bottom at the end of each downtrend. If we add up all the historical lows of this metric, we get a clearly visible rising support line (red).

bitcoin supply in profit chart by glassnode
chart by glassnode

Bullish divergence before the bounce

An interesting development seen in the last two bear markets is the sharp divergence between BTC price and supply in gains. This is because it turns out that the macro bottom of bitcoin price (green lines) was not related to the bottom of supply in gains (blue lines).

These events have historically been separated by periods of accumulation after BTC bottomed. The last two bear markets, 2015 and 2018-2019, saw bullish divergence:

  • 2015
    • Jan 14, 2015 – High at 5.420 million BTC, BTC price low at $172 (Green)
    • August 24, 2015 – Bottom at 5.254 million BTC, BTC price high at $211 (blue)
  • 2018-19
    • Dec 14, 2018 – High at 6.960M BTC, Low at $3,242 for BTC price (Green)
    • February 7, 2019 – Low 6.834 million BTC, High $3,400 BTC price (blue)
  • 2022
    • Nov 21, 2022 – 8.588 million BTC down, and BTC price down to $15,797 (green)

In the current bear market, neither the price of BTC nor the supply has reached further lows in profits. We are yet to see another blue line on the charts. Thus, if a bullish divergence does not occur between bitcoin price and this metric, a continuation of the accumulation phase or even a decline to lower price levels is likely.

Bitcoin supply in deficit

If you reverse the supply in profit, you get the indicator of supply in loss. It determines the number of coins whose price was higher than the current price at the time of the last move. Of course, its historical peaks mark the lowest bitcoin price levels. It can also be expected that the deficit supply will increase over time as the total BTC supply increases.

In fact, on the long-term chart of BTC price and loss in supply, we see that successive bear markets have spawned new peaks in this metric. The peak was at 4.344 million BTC on November 18, 2011 and correlated with a $2.05 bottom BTC price.

Four years later, on August 24, 2015, the peak was already 9.280 million BTC, with a bitcoin price of $211. It is noteworthy that the macro BTC bottom in this cycle was reached in January 2015 at $172.

The last peak was seen on February 7, 2019, at a level of 10.691 million BTC, with a bitcoin price of $3,400. Prior to this, BTC peaked at $3,242 on December 14, 2018. Worth noting that there was a high level of supply loss during the COVID-19 crash in March 2020. At that time, the indicator briefly reached 10.399 million BTC, and the price of bitcoin fell. for $4,860.

Interestingly, today’s indicator readings are still lower than those of 2019 and are also below the March 2020 crash. The last supply peak in losses was reached at 10.272 million BTC on November 21, 2022, with a bitcoin price of $15,797. Thus, if the upward trend continues in the long term, BTC may face even lower levels.

bitcoin supply in loss chart by glassnode
chart by glassnode

waiting for breakdown from support

Another look at the supply at loss chart comes from its long term trends. In the previous section, we said that increases in this metric correlate with BTC price declines, bearish cycles, and subsequent accumulations.

If one were to draw upward trend lines for supply to losses during bearish cycles, we see at least three such patterns (red lines). Two are clearly related to the 2014-2015 and 2018-2019 bear markets, while the third appeared after the June 2019 local peak of $14,000 BTC price.

In all cases, the breakdown from the uptrend line (blue lines) is correlated not so much with the end of the bear markets, but with the end of the long-term accumulation that followed. Furthermore, in the previous case, it was a multi-month re-accumulation after the COVID-19 crash bottom. The break of these support lines was immediately followed by a significant upward movement of BTC and a resumption of the bull market (blue arrows).

bitcoin supply in loss chart by glassnode
chart by glassnode

A similar rising support line can be drawn for 2022. However, we can see that at the moment, there are no signs of any breakdown. Therefore, the trend will not resume for a few months even if the BTC macro bottom is reached.

Supply in Profit and Loss: Intersection before Surrender

Another trick that can be done with the supply metrics in profit and loss is to compare them against each other. On the longer-term chart of their 14-day moving averages (14D MAs), we can see how in most periods, the supply in gains (orange) outweighs the supply in losses (blue).

However, there are rare occasions when the two lines intersect, and the supply in losses briefly outweighs the supply in gains. Obviously, such moments occur around the macro bottom of BTC price and the subsequent accumulation (green area).

So far, the curves have intersected four times. These examples correspond to bearish market bottoms in 2011, 2014-15, 2018-19 and 2022 (green areas). A brief touching of the curves was also recorded during the COVID-19 crash in March 2020 (blue circle).

It is worth noting that the final capitulation of BTC price in all previous bear markets did not occur during their first intersection (red lines), but several days/weeks later. Currently, supply in profit is less than supply in loss for the first time.

Bitcoin supply loss and gain chart by Glassnode
chart by glassnode

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