Bitcoin on-chain data shows 5 reasons why the BTC bottom could be in

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After a whirlwind November for Bitcoin (BTC), some on-chain and Bitcoin price metrics suggest that BTC’s bottoming could occur in December. In the latest report from Capriole Investments, they provided an analysis on Bitcoin finding the bottom. Taking into account realized value, miner capitulation, mine electricity costs, drawdown, and record hodler numbers, a BTC floor of $16,600-$16,950 appears to have formed.

Here are five reasons why Edwards thinks Bitcoin price is approaching a cycle low.

SLRV ribbons emit a buy signal

SLRV tapes track investment flows by combining the 30-day and 150-day moving averages at the SLRV ratio, which is a percentage of Bitcoin moved in 24 hours divided by BTC held for 6-12 months.

Bitcoin SLRV ribbons. Source: Glassnode

According to Charles Edwards, the SLRV ribbons outperform the hodl BTC strategy, making it a strong indicator of where the BTC price might be headed.

While the SLRV Ribbons have been bearish throughout 2022, the recent move to $16,600 has tipped the indicator higher. According to Edwards, the change creates a buy signal for investors and institutional funds still in the market, establishing a strong case for the Bitcoin price floor.

BTC Price Slips Below Its Global Electric Cost

Although it is well known that a large portion of Bitcoin miners are currently operating at a loss, this is not an uncommon phenomenon in BTC’s history.

The total production cost of Bitcoin miners includes mining hardware, operating costs, investment costs, variable rate electricity contracts and other factors, while the electricity cost only takes into account the raw electricity used to mine the BTC.

Bitcoin production cost and BTC electrical cost. Source: Glassnode

The gross electric cost has always been a bottom for Bitcoin as it is rare for BTC to trade below this price. Historically, Bitcoin has only traded below the electric cost four times, the most recent being on November 10, when the electric cost of Bitcoins hit $16,925.

BTC Miner Sale Hits Peak

Miners are still losing money with production costs higher than the spot price of Bitcoin. This dichotomy forces miners to sell Bitcoin to stay afloat.

The current level of Bitcoin miner selling is the third highest in history, with the other two events occurring when BTC was $2.10 in 2011 and $290 in 2015.

Miner BTC selling pressure, major events. Source: Trading View

In hindsight, investors would like to recover these prices and Edwards suggests that the current price of BTC could represent a similar value.

Bitcoin Hash Ribbons confirms another miner capitulation

The capitulation of bitcoin miners involves miners turning off their ASICs that are no longer profitable and selling parts of their bitcoin reserves to cover their expenses.

According to Capriole Investments, during miner breakouts, a price floor forms before the hash rate begins to improve. As shown in the chart below, another miner capitulation occurred on November 28th and if the analysis is correct, this would put Bitcoin at lows at around $16,915 as the hash rate started to rise. after the date of November 28.

Bitcoin mining hash ribbons. Source: Trading View

Related: Bitcoin Clings to $17,000 as ARK Signals “Historically Significant Capitulation”

Hodling Bitcoin record despite historic price drop

A metric used to analyze the behavior of Bitcoin hodler is the Long-term Holder Net Unrealized Profit and Loss (NUPL) tracker.

Throughout Bitcoin’s history, the NUPL metric has only shown such a significant drop on four occasions.

Bitcoin NUPL metric. Source: Glassnode

Previous occasions that saw such significant declines represented the value of Bitcoin purchases for investors. Edwards suggests that if investors see the price of BTC as undervalued, their choice to hoard could further solidify the Bitcoin floor.

Another trend is forming as the long-term hodler metric hits highs. Currently, 66% of Bitcoin supply is in the hands of long-term holders, meaning they have held their Bitcoin for more than a year.

According to Edwards, this behavior is aligned with the evolution of macro markets.

We have a historic long-term hodling record. Those who keep Bitcoin for at least 1 year now represent more of the network than ever before, 66%. Previous long-term holding spikes were all aligned with bear market difficulties. pic.twitter.com/4IXnUg5f3S

— Charles Edwards (@caprioleio) December 6, 2022

While markets are still highly correlated to equities and vulnerable to macro shifts, several data points suggest that Bitcoin could be in the latter stages of a bottoming process.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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