Metrics Indicate Bullish Sentiment as Illiquid Bitcoin Supply Hits 80%

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CryptoSlate analysis of Bitcoin (BTC) metrics reveals market bottom may have been hit as investors continue to hoard BTC and push illiquid supply up to 80%.

Analysts looked at metrics, including the MVRV-Z and Realized Price metrics, to find that both indicate bullish sentiments.

MVRV-Z Metric

The MVRV-Z score is used to assess whether BTC is overvalued or undervalued. When the market value is significantly above the “fair value” of BTC, the metric remains in the red zone. On the other hand, if the price is below the realized value of BTC, the metric persists in the green zone. The graph below represents the MVRV-Z metric with the orange line.

BTC MVRV-Z since 2010

The metric entered the green zone in mid-2022, just after the collapse of LUNA, and has been moving into the green zone ever since. It only broke through very recently, which could signal that the bottom of the market has been reached.

Historically, the price of Bitcoin has fallen significantly whenever the MVRV-Z metric hits the red zone. According to the chart, this correlation has been visible six times since 2010. Therefore, it is possible to conclude that the MVRV-Z metric indicates a market top if it is in the red zone.

Similarly, historical evidence also shows that the price of Bitcoin increases after the metric hits the green zone, indicating a market bottom. The price movements recorded at the beginning of 2012, 2015, 2019 and 2020 correspond to market lows.

Realized price BTC

The realized price is calculated by dividing the realized cap by the current bid. The metric signifies a bearish market when the actual price falls below the realized price. Conversely, if the actual price exceeds the realized price, it indicates a bull market.

BTC has realized its price since 2010

The chart above depicts the relationship between the realized price of BTC and the actual price since 2010. The actual price of BTC has been below the realized price since mid-2022. However, this balance has changed very recently as the actual price has risen above the realized price, indicating bullish market sentiment.

80% of BTC is illiquid

Investors have been accumulating BTC over the past few months. However, cCyptoSlate analysis on December 13, 2022 revealed that the amount of BTC that was sitting on exchanges had reached its all-time low since 2018.

Withdrawals have also been significant, and by the end of November, over $2 billion worth of BTC was withdrawn from Coinbase. On December 23, Binance lost 90,000 BTC of its reserves in one week. Another $120 million worth of Bitcoin was withdrawn from different exchanges in the first ten days of 2023.

Current metrics point to a bottom in BTC since Jan. 19. On January 21, BTC broke through the $23,000 level, registering a 50% increase from its bear market low of $15,400. However, upward price movements did not stop BTC withdrawals. A0,000 BTC was withdrawn from exchanges on January 20, with the majority removed from Binance.

The data also indicates that a large amount of withdrawn BTC is sent to cold storage. For example, 450,000 BTC held on hot wallets or exchanges were moved to cold storage in 2022.

So far in 2023, an additional 110,000 BTC have been sent to cold storage. Thus, the amount of illiquid BTC held in cold wallets reached an all-time high of 15.1 million coins. This amount represents 80% of the total circulating supply of BTC.

BTC illiquid supply

The chart above depicts illiquid BTC supply with green areas while showing liquid supply with red. BTC accumulations have significantly increased illiquid supply since July 2022, except for brief periods in July and October.

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