Analysis of on-chain metrics suggests Bitcoin is firmly in capitulation phase

Since June, Bit­coin (BTC) – and the gen­er­al mar­ket sub­se­quent­ly – has been in capit­u­la­tion, oth­er than a hand­ful of ral­lies seen in the sum­mer of this ongo­ing bear mar­ket accord­ing to on-chain data pro­vid­ed by Glassnode, and ana­lyzed by Cryp­toSlate.

Both bull and bear mar­kets reveal on-chain sen­ti­ment data, rang­ing from ‘Capit­u­la­tion’ to ‘Eupho­ria – Greed. In the height of a bull mar­ket, the top is his­tor­i­cal­ly indi­cat­ed when Eupho­ria grips tight­ly. On the oth­er hand, Capit­u­la­tion usu­al­ly sig­nals the bottom.

Ongoing capitulation

The chart below shows that BTC has firm­ly sunk into the Capit­u­la­tion sen­ti­ment as the Net Unre­al­ized Profit/Loss (NUPL) on-chain data dis­plays a descent into red ter­ri­to­ry seen pre­vi­ous only in 2012, 2015, and 2019.

Bitcoin: Decreased circulating supply

The Bit­coin: Per­cent Sup­ply in Prof­it (7‑day Mov­ing Aver­age) met­ric shows that cur­rent­ly, only 54% of BTC’s cir­cu­lat­ing sup­ply was last moved on-chain for prof­it. Through the FTX col­lapse, this met­ric depicts BTC cir­cu­lat­ing sup­ply falling below 50% – a lev­el which has only hap­pened dur­ing bear mar­ket lows.

Bitcoin: Over or Undervalued?

Analy­sis of the MVRV Z‑Score (7‑day Mov­ing Aver­age) met­ric reveals that we are already over 170 days below the real­ized price.

Though Bit­coin did go above the real­ized price as the result of bear mar­ket ral­lies, his­tor­i­cal­ly pre­vi­ous bear mar­ket days below the real­ized price sug­gest the poten­tial for fur­ther capitulation.

Pre­vi­ous Bear Markets:

• 2019–20: 134 days below the real­ized price
• 2015–16: 384 days below the real­ized price
• 2011-12: 215 days below the real­ized price

To sum­ma­rize all cov­ered met­rics in this analy­sis, the signs of the mar­ket bot­tom ana­lyzed are con­sis­tent with oth­er bear mar­ket cycles. How­ev­er, in assess­ing and com­par­ing this bear mar­ket to pre­vi­ous bear mar­kets, we could eas­i­ly be below the real­ized price for anoth­er six months to a year.

With the addi­tion of geopo­lit­i­cal issues, macro uncer­tain­ty, and head­winds, call­ing a bot­tom in an unprece­dent­ed time such as this can only remain spec­u­la­tion guid­ed by his­tor­i­cal data.