Bitcoin continues to trade within a narrow range, hovering around $66,500 going into the week. While price action still appears subdued, recent on-chain data suggests this period of consolidation could be signaling the formation of a market bottom.
Supply In Profit Drops To 11.3 Million BTC
In a Quicktake post on the CryptoQuant platform, on-chain analyst EgyHash put forward a somewhat optimistic outlook on the Bitcoin price, saying the flagship cryptocurrency might be forming a major cycle bottom. The relevant on-chain indicator here is the Supply in Profit Market Bands metric.
As observed in the chart below, the blue area on the graph represents the Supply in Profit, while the green line marks the Bottom Discovery.
Source: CryptoQuant
According to EgyHash, the Supply in Profit has recently fallen to about 11.3 million BTC. This is after tearing through the Psychological Inflection (orange) and Liquidity Accumulation (purple) lines.
More importantly, EgyHash noted that the Bitcoin Supply in Profit landed directly on the “Bottom Discovery” area. This particular band, according to the analyst, is where most Bitcoin short-term holders have been forced to turn over their holdings.
Historically, the Supply in Profit reading has only reached the green band during major bottoms of the Bitcoin cycle. The market quant cites the depths of the crypto winter in the 2018/2019 period as an example; the March 2020 liquidity crisis also features in this data, with the other instance being the late 2022 post-FTX capitulation.
Notably, the expert also points out that the speed of the current transition is astounding. This is because the Bitcoin market moved quickly from the Overheated Zone to the Bottom Discovery within a single flush.
EgyHash explained that this is a tell-tale sign that “Seller Exhaustion” has become the current state of affairs, with the “Mania” phase already long superseded.
Long-Term Holders Display Dominance As Sell Pressure Wanes
Typically, when the Supply in Profit reaches this significant base, it signals that long-term holders have taken the reins. This is the classic scenario where diamond hands absorb the supply of weaker hands.
Nonetheless, the crypto pundit highlighted an important caveat, saying falling to the Bottom Discovery band “does not guarantee an immediate V-shaped recovery,” but that it instead signals a relatively high exhaustion of bearish risk. As such, market participants are advised to wait for further confirmation before making their move.
As of this writing, the Bitcoin price sits at approximately $66,901, reflecting no significant change in the past 24 hours.
Featured image from iStock, chart from TradingView
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