Bitcoin (BTC) on-chain indicator that tracks the amount of coins held by long-term holders (LTH) in losses signals that a market bottom could be near.
Scarily accurate bitcoin bottom expert
As of September 22, approximately 30% of Bitcoin LTHs were facing losses due to BTC down from $69,000 in November 2021 to about $19,000 now. That’s about 3-5% below the level previously coinciding with bitcoin market lows.
For example, in March 2020, the price of Bitcoin fell below $4,000 Market crash led by COVID-19which happened when the amount of BTC supply held by LTH in loss climbed to 35% as shown below.
Similarly, Bitcoin bottom in December 2018 around $3,200 in line with the LTH loss metric rising above 32%. In both cases, BTC/USD entered a long bullish cycle.
Thus, the number of LTH losses during a typical bear market tends to peak in the 30-40% range. In other words, the price of Bitcoin still has room to fall – probably to the $10,000-$14,000 range – for “LTH in loss” to reach the historical bottom zone.
Coupled with the LTH supply metric, which tracks the supply of BTC held by long-term holders, these investors appear to accumulate and hold during market declines and distribute during BTC uptrends, as shown below.
Therefore, the next bull market may begin when the total supply held by LTH begins to decline.
Bitcoin accumulation is strong
Meanwhile, the number of accumulation addresses continues to increase during the current bear market shows. The metric tracks addresses that have “at least two incoming dust transfers and have never spent funds.”
Interestingly, this is different from previous bearish cycles where the number of accumulation addresses fell or stayed the same as shown in the chart above, suggesting that the “hodlers” are not worried about the current price levels.
In addition, the number of non-zero balance addresses is around 42.7 million, up from 39.6 million at the beginning of this year, indicating consistent user growth in the bear market.
BTC price technicals suggest further decline
However, Bitcoin is trying to regain $20,000 as support in a higher interest rate environment. Its correlation with US stocks as well indicates another disadvantage in 2022.
Technically, Bitcoin could further down to $14,000 in 2022 if its cup and handle fail as shown below.
Such a move should push the aforementioned “LTH in loss” metric towards the 32%-35% capitulation area, which could eventually coincide with a day in the current bear market.
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