cryptoslite Bitcoin (BTC) metrics analysis reveals market bottom may be reached as investors continue to accumulate BTC and push illiquid supply up to 80%.
Analysts reviewed metrics, including the MVRV-Z and Realized Price metrics, to discover both of them indicate bullish sentiment.
The MVRV-Z score is used to assess whether BTC is above or below its value. When the market cap is much higher than the “fair value” of Bitcoin, the scale remains in the red. On the other hand, if the price is below the realized value of BTC, the scale will still be in the green area. The graph below represents the MVRV-Z scale in the orange line.
The scale entered the green zone in mid-2022, immediately after the LUNA device collapsed, and has been moving within the green zone ever since. It only recently broke out, which may indicate that the bottom of the market has been reached.
Historically, the price of Bitcoin has fallen significantly when the MVRV-Z scale has reached the red. According to the chart, this correlation has been visible six times since 2010. Therefore, it is possible to conclude that the MVRV-Z scale indicates the top of the market if it is in the red.
Similarly, historical evidence also shows that the price of bitcoin is rising after the metric reaches the green area, which indicates a market bottom. The price movements recorded in early 2012, 2015, 2019 and 2020 correspond to the market bottoms.
BTC has realized the price
The realized price is calculated by dividing the maximum realized by the current bid. The metric indicates a bear market when the actual price falls below the realized price. Conversely, if the real price rises above the realized price, this indicates a bull market.
The chart above represents the relationship between the realized price of BTC and the actual price since 2010. The real BTC price has been below the realized price since mid-2022. However, this balance has shifted recently as the actual price has exceeded the realized price, indicating a bull market sentiment .
80% of Bitcoin is illiquid
Investors have accumulated BTC over the past few months. However, cCyptoSlate Analysis from December. 13, 2022, revealed that the amount of BTC that was present on the exchanges had reached an all-time low since 2018.
Withdrawals have also been in large chunks, and at the end of November, over $2 billion in BTC was withdrawn from Coinbase. in December. 23, Binance lost 90,000 BTC from its reserves in a week. Another $120 million worth of Bitcoin was withdrawn from various exchanges during the first 10 days of 2023.
Current metrics point to a bottom for BTC since January 3rd. 19. In January. On the 21st, BTC breached the $23,000 level, posting a 50% increase since the bear market low of $15,400. However, bullish price movements did not stop bitcoin withdrawals. A0,000 BTC was pulled from the exchanges on January 3rd. 20, with the majority withdrawn from Binance.
The data also indicates that a large amount of withdrawn BTC is sent to cold storage. For example, 450,000 BTC held in hot wallets or exchanges were moved to cold storage in 2022.
Another 110,000 BTC has been sent to cold storage so far in 2023. With this, the amount of illiquid BTC held in cold wallets has reached an all-time high of 15.1 million coins. This amount represents 80% of the total circulating supply of BTC.
The above chart represents Bitcoin’s illiquid supply with green areas while liquid supply is shown in red. Bitcoin accumulations have significantly increased the illiquid supply since July 2022, with the exception of brief periods during July and October.