Several Bitcoin (BTC) on-chain metrics indicate that it may be time to buy. BTC came out of its torpor, recording an increase of 37% from the beginning of 2023 to today; but according to blockchain data, the cryptocurrency’s bullish momentum is far from over.
On Jan. 24, “Game of Trades” researcher and analyst identified for his 71,000 Twitter followers six positive on-chain parameters.
Bitcoin: 6 on-chain metrics calling for a generational long-term buying opportunity
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— Game of Trades (@GameofTrades_) January 23, 2023
The first of these parameters is a general tendency to hoard the asset. “Large entities have started piling up since the collapse of FTX,” noted the analyst. “A similar buildup also occurred at the 2018 and 2020 bottoms.“
L’Entity-Adjusted Dormancy Flow di Bitcoin instead, it is a metric that measures the ratio between the current market capitalization and the annualized “dormancy value”, i.e. the last time the spent BTC was moved on-chain. When dormancy value overrides market capitalization, full capitulation has usually been reached – in practice, this is historically a good time to buy.
According to Glassnode, in 2022 this metric dropped to its lowest level ever.
The third parameter is instead Bitcoin reserve risk: Can be used to measure long-term holders’ distrust of the current BTC price. That too dropped to its lowest level ever in 2022, according to Glassnode.
Then there is the realized price of Bitcoin, i.e. the value of all coins in circulation at the price they were last moved to. In other words, it estimates how much the entire market paid for their coins. BTC is currently just above its realized price, which represents another buying opportunity.
Il MVRV Z-Score shows when Bitcoin is significantly above or undervalued from its “fair value.” When this metric leaves the “extremely undervalued” zone, it often indicates the end of the bear market.
Finally there is the Puell Multiple, which examines the profitability of mining and its impact on market cycles. Lower values, such as the current ones, indicate low stress among miners and consequently potential long-term buying opportunities.
Read also: Bitcoin is still holding up: last week it touched $23,300
Game of Trades concluded their analysis by claiming that these six parameters”indicate an exceptional risk-reward setup in Bitcoin,“ as they are at levels similar to the bottoms of 2015, 2018 and 2020.
