This is one of the many findings of Philip Swift, a famous network analyst whose data source, LookIntoBitcoin, has tracked many of the most well-known bitcoin market indicators.
Swift, who with analyst Filbfilb is also a founding member of the trading package Decentrader, believes that despite today’s price pressures, bitcoin will soon leave the latest macroeconomic downtrend.
In a recent interview with Cointelegraph, Swift talked about what the data is telling analysts and what traders should look at as a result.
How long will the average worker have to wait for things to change and bitcoin to return from its two-year low?
Cointelegraph (CT): You have pointed out that some of the chain indicators like HODL Waves and RHODL Ratio are pointing to a BTC bottom. Can you expand on that? Are you sure that history will repeat this cycle?
Philip Swift (PS): I think we are now on the cusp of the maximum opportunities for Bitcoin. There are several major indicators on LookIntoBitcoin which indicate that we are in the lows of the major cycles.
We see the percentage of long-term holders of stocks peaking (the one-year HODL wave), which usually occurs at the depth of a bear market, where those long-term holders don’t want to take profits until the price goes up.
This reduces the supply available in the market, which can lead to higher prices when eventually demand rises again.
Bitcoin HODL Wave Chart. Source: LookIntoBitcoin
We’re also seeing metrics like the RHODL ratio drop into their areas of accumulation, which shows just how far the euphoria is now out of the market. This elimination of positive sentiment is necessary to form a lower BTC zone.
The RHODL ratio highlights that the underlying value of recent bitcoin purchases is well below the prices paid a year or two ago when the market was in absolute euphoria and expected +$100,000 per bitcoin. This way, he can tell us when the market will reset in preparation for the start of the next cycle.
Bitcoin RHODL chart. Source: LookIntoBitcoin
CT: How is this bear market different from previous BTC cycles? Is there a silver lining?
Note: I was close to a 2018/19 bear market which is actually very similar. All the tourists left, and only crypto-enthusiasts remained in the room. These guys will get the most out of the next bull run – as long as they don’t go crazy using leverage in trading.
As for the silver linings, I have a couple! First, we’ve already been through the market cycle and we’ve probably already been through most of the bear market. The chart below shows Bitcoin’s performance for each cycle since the halving, and we’re already at the capitulation points of the previous two cycles.
Bitcoin bull market comparison chart. Source: Philip Swift / Decentrader.
Second, the context of macros has changed a lot now. While it is painful for the bulls to see bitcoin and cryptocurrency strongly correlate with the difficulties of traditional markets, I believe we will soon see demand for bitcoin as confidence in (main) government crosses the point of no return to the bottom.
I believe this distrust of governments and their currencies will spark a desire for private “hard” assets, with Bitcoin being the main beneficiary of this trend in 2023.
CT: What other key numbers in the series would you also recommend watching for a bottom?
Note: Beware of Twitter characters that show bitcoin chain charts separated by weird/weird variables. Data like this rarely adds real value to the story shown by the most important KPIs, and these individuals do it simply to get attention, not to really help people.
Two calculations that are particularly useful in today’s market conditions are:
The MVRV Z-Score is an important and widely used metric for Bitcoin. Bitcoin price rise is shown moving above or below the strike price. The realized price is the average value of all bitcoins purchased. Thus, it can be considered as the approximate break-even level of the market. The price falls below this level only in severe bear market conditions.
At the same time, the indicator on this chart is located in the green “accumulation” area. We are currently in this area, which indicates that these could be very good levels for a long-term strategic investor to accumulate more bitcoin.