Deciphering Bitcoin's Bottom: A Guide to 4 Crucial On-Chain Indicators

2024-07-11, 01:46

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![](https://gimg2.gateimg.com/image/article/1720662157sdfx.jpeg)
## [TL; DR]
The crypto market sentiment shows that many investors believe that a <a href="/zh-tw/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> market bottom has occurred.

Bitcoin is still trading above $56,000, a critical key support level.

After a bottom there should be bitcoin demand growth, rise in stablecoin liquidity and the traders’ on-chain unrealized profit margins should flip positive.

## Introduction 
The current depressed bitcoin market has instilled fear in crypto investors. Many investors are worried because the market looks strongly bearish. Since the market has been moving sideways for a long time, some investors want to know when bitcoin will rally again. To determine if bitcoin has bottomed, one should use several key market indicators, such as the level of demand and supply and trader profitability.

## Deciphering Bitcoin's Bottom: A Guide to 4 Crucial On-Chain Indicators
The crypto market's scenario has been shaped by what has occurred since the beginning of the year. From the start of the year to around May, prices of most cryptocurrencies surged. Interestingly, several leading cryptocurrencies, including <a href="/zh-tw/price/litecoin-ltc" target="_blank" class="blog_inner_link">Litecoin</a> and Bitcoin, attained new all-time highs during that period. As a result, the market anticipated the bullish period to continue after the bitcoin halving event. Sadly, the crypto bullish momentum fizzled out a few weeks after the much-hyped halving event.

After having a strong correction following the halving event, the market expected bitcoin to reach a bottom before rallying again. Many crypto investors are not sure whether or not bitcoin has reached the expected bottom. It's time that we carry out a bitcoin analysis to establish if the bitcoin bottom 2024 has yet occurred.

**Bitcoin Demand Growth**: The first thing to do in analyzing bitcoin’s market cycle is to evaluate the level of demand in the market. The market can use the demand of long-term bitcoin holders to determine whether or not a bottom has already been reached. In recent weeks holders were buying bitcoin at an average price of $72,000. Based on a critical <a href="/zh-tw/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin price</a> analysis, the current level of demand is still lower than it was during the first part of 2024. Only if the level of bitcoin demand has risen above the earlier level can the market conclude that a bitcoin bottom has been reached. From there any savvy crypto investor can use the existing cryptocurrency market trends to make his/her bitcoin market prediction.

Based on previous bitcoin insights the [behavior of long-term holders (LTHs) plays an important role](https://www.gate.io/blog_detail/3286/btc-halving-done-long-term-holders-record-highs "behavior of long-term holders (LTHs) plays an important role") on the crypto asset supply side. The LTHs normally distribute coins during bull markets leading to formations of bitcoin market tops. At present, the bitcoin bottom indicators show moderate LTH divestment, which indicates that the market is moving towards an equilibrium. Onchain signals bitcoin shows that the LTHs are neither offloading nor accumulating much bitcoin, meaning that there is balanced supply dynamics.

Since the market is in an almost equilibrium state, we wait to find out if bitcoin demand will grow or fall. If the demand for bitcoin grows significantly, it means [that the bitcoin bottom 2024 has been reached.](https://www.gate.io/blog_detail/3935/bitcoin-cycle-peak-august-2025 "that the bitcoin bottom 2024 has been reached.") However, if there is a further fall in bitcoin demand, it indicates that a bottom has not yet been reached.

## Trader Profitability: Current Profitability of Traders and Its Implications for Selling Pressure
One of the [other on-chain analysis tools](https://www.gate.io/blog_detail/709/what-is-on-chain-analysis "other on-chain analysis tools") that can help us in deciphering bitcoin price movement is trader profitability. Currently, the on-chain unrealized margin for traders is in the negative zone which suggests low selling pressure, with no clear possibility for a price rebound. For a resurgence of the bitcoin price to occur and confirm the asset’s bottom state the on-chain unrealized margins for traders should turn positive and move above their 30-day simple moving average (SMA). Also, to confirm a bitcoin bottom 2024, the asset’s spot price should be above the cost basis of both “the 1-week to 1-month-old holders.”

Read also: [Bitcoin Whales Realize Over $1 Billion in Fortnight](https://www.gate.io/ru/blog_detail/4308/-bitcoin-whales-realize-over-1b "Bitcoin Whales Realize Over $1 Billion in Fortnight")

According to BeInCrypto, [Glassnode commented](https://beincrypto.com/bitcoin-bottom-4-on-chain-signals/ "Glassnode commented") on the current state of the bitcoin market. It said, “Since mid-June, the spot price has plunged below the cost basis of both the 1-week to 1-month-old holders ($68,500) and 1-month to 3-month-old holders ($66,400). If this structure persists, it has historically resulted in a deterioration of investor confidence and risks this correction being deeper and taking longer to recover from.” Therefore, the investors should wait for such a development or other cryptocurrency trading signals before altering their bitcoin investment strategies.

## Stablecoin Liquidity: Role of Tether’s USDT Market Capitalization as a Liquidity Indicator
The cryptocurrency liquidity analysis can also help us determine whether bitcoin has bottomed. A rise in the stablecoin market liquidity will signify that bitcoin has bottomed and that it is time for it to rally. For example, <a href="/zh-tw/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> USDT’s market capitalization growth will signal that the bitcoin bottom 2024 is over. The Tether USDT liquidity peaked in April. However, since then it has been growing at a very low rate of about just $2.5 billion, making it the slowest pace since November 2023.

At present, there is a need for a strong stablecoin impact on the market. In other words, a strong and sustained rise in Tether USDT liquidity will signal that the Bitcoin bottom 2024 has been reached, stimulating stronger crypto activity than before. Once that happens, it will become easier for crypto investors to forecast future bitcoin investment trends.
## Bitcoin Price Support Level: Bitcoin's Current Support Level Based on Metcalfe’s Price Valuation Bands
One of the bitcoin bear market indicators to watch are bitcoin support levels. According to [CryptoQuant, as quoted by BeInCrypto](https://beincrypto.com/bitcoin-bottom-4-on-chain-signals/#:~:text=%E2%80%9CThis%20valuation%20is%20based%20on,and%20support%20in%20previous%20cycles. "CryptoQuant, as quoted by BeInCrypto"), the analysis of Bitcoin’s support levels is based on “Metcalfe's law that states that the value of a network is proportional to the number of users in the network.” The key support level to watch in this regard is the $56,000 mark which acted as both a support and resistance level during the previous cycles. If the bitcoin spot price falls below $56,000 that indicates a strong correction. However, if the prevailing price remains above this level it indicates that a bottom has occurred.

Read also: [How to use On-chain Data for market Analysis](https://www.gate.io/zh/blog_detail/1674/how-to-use-on-chain-data-for-market-analysis "How to use On-chain Data for market Analysis")
## Analysis of Bitcoin's Potential Price Bottom
After discussing the key aspects which include bitcoin long term holders’ impact and  Met Calfe’s law bitcoin, let’s make a final assessment whether or not bitcoin has bottomed. As of now, there is no conclusive confirmation of whether bitcoin has bottom although some indicators suggest so.

First, since the bitcoin spot price is still above $56,000 it is an indication that bitcoin might have reached the bottom. In addition, the bitcoin market sentiment analysis shows that the bitcoin bottom might have occurred. The reason is that there has been a rise in the use of the term "bottom” in social volume and dominance which indicates that many crypto investors feel that the bitcoin bottom has already occurred.

However, the other signals have not confirmed that the bitcoin bottom has occurred. For example, there is no strong growth in bitcoin demand to warrant the market to conclude  that a bottom has indeed occurred. Also, the traders’ on-chain unrealized profit margins have not yet turned positive to confirm a possibility of a strong rally. Lastly, there is no acceleration of Tether USDT growth which is often associated with rising bitcoin demand. A further <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> vs bitcoin market analysis may help the market to conclude and confirm the stage of the bitcoin market cycle the asset is in. 
## How to buy Bitcoin on Gate.io
To <a href="/zh-tw/how-to-buy/bitcoin-btc" target="_blank" class="blog_inner_link">buy Bitcoin</a> on Gate.io, you need to create and verify your account on the exchange. If you already have an account, log in and select the payment method you want to use. You can use a credit/debit card, wire transfer, or P2P trading to buy Bitcoin. To start buying, hover your cursor on [Buy Crypto](https://www.gate.io/crypto/buy/with-credit-card?method=card&fiat=USD "Buy Crypto") and select your preferred payment method, as the following picture indicates.
![](https://gimg2.gateimg.com/image/article/17206623441.jpeg)
After clicking on your preferred payment method, follow the instructions you get. 
## Conclusion 
Four key indicators show whether or not a Bitcoin bottom has occurred. These are bitcoin demand growth, trader profitability, stablecoin liquidity, and BTC price support levels. Some of these indicators show that a Bitcoin bottom might have occurred. However, the other indicators have not confirmed that development. Therefore, the crypto market needs to keep track of these indicators to confirm a Bitcoin bottom.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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