According to a recent analysis by CryptoQuant, the Bitcoin (BTC) price appears to have reached a local price floor. BTC rose to around $66,000 earlier this week after a significant decline.
CryptoQuant's weekly report published today highlighted that Bitcoin's price drop to around $55,000 last Wednesday resulted in the largest loss for BTC holders so far in 2024. Bitcoin holders lost $2.5 billion in just two days last week, while profit-making remained minimal compared to March.
“The realization of large losses is typically a sign of seller capitulation and is associated with price bottoms,” CryptoQuant analysts explained.
The report also explained that unrealized losses of Bitcoin investors last week reached levels not seen in nearly two years. “Investors' unrealized margins are currently -5.7%, reaching -17% last week, the most negative since shortly after the FTX exchange crash in November 2022,” analysts said.
Analysts added that prices typically hit bottom when traders' profit margins reach extremely negative levels, as seen last week.
Various Bitcoin valuation metrics have recently jumped from significant levels, pointing to a local price bottom and signaling further positive price momentum, according to analysts. CryptoQuant analysts have listed three chart indicators that suggest the recent rally in Bitcoin price could turn into a long-term rally.
“The Bitcoin Profit and Loss (P&L) Index rose above its 365-day moving average, and the Bull-Bear Market cycle indicator rose above its 30-day moving average, and the Metcalfe price valuation bands acted as support for prices for the second time this year,” analysts said.
However, the report warned that stablecoin liquidity is still not accelerating enough for a full-fledged bull run. “A necessary condition for a sustained Bitcoin price rally is stablecoin liquidity,” analysts said.
Despite some positive movements in stablecoin market capitalization, monthly market cap growth of USDT is still close to zero. “This situation reduces the potential for a more significant rise in Bitcoin prices,” the report said.
*This is not investment advice.