Data shows Bitcoin has bottomed, but one indicator warns it could end up as low as $14,000

“When will it end?” is the question on the minds of investors who have weathered the current crypto winter and seen the demise of multiple protocols and investment funds over the past few months.

With Bitcoin once again testing resistance at its 200-week moving average this week, the real challenge is whether it can push higher against multiple resistances, or whether the price will fall back into the range it has been stuck in since early June.

According to the latest news from on-chain market intelligence firm Glassnode, "duration" is the main difference between the current bear market and previous cycles, and many on-chain indicators are currently in line with these historical downtrends.

A proven indicator of a bear market bottom is the realized price, which is the value of all bitcoins at the time of purchase divided by the number of bitcoins in circulation.

Number of days Bitcoin trades below realized price Source: Glassnode

As the chart above shows, with the exception of the March 2020 flash crash, Bitcoin traded chronically below its realized price during bear markets.

Glassnode says:

"The average time below realized price is 197 days, and the current market is only 35 days below realized price."

This would suggest that it is premature to call for the end of the crypto winter to be imminent, as historical data suggests that the market will still have several months of sideways price action before the next major uptrend emerges.

Is the bottom closer to $14,000?

When it came to what traders should be watching to signal the end of the cold winter, Glassnode emphasized that Delta prices and Balanced prices are “on-chain pricing models that tend to attract spot prices later in bear markets.”

Bitcoin realized price, balanced price and delta price Source: Glassnode

As shown in the above chart, the green part shows that the previous major bear market lows were all formed after "short-term declines to reach Delta prices". A similar move in today's market would indicate a low for BTC near $14,215.

During these bear markets, BTC’s price also traded within the cumulative range between “Balanced Price (range low) and Realized Price (range high),” which is where the price is currently.

A classic sign that a bear market is coming to an end is a massive capitulation event that drains the last remaining sellers of their funds.

While some are still debating whether this has already happened, Glassnode highlighted that on-chain activity during the plunge to $17,600 in June could be a sign that capitulation has already occurred.

The total Bitcoin supply is in the red. Source: Glassnode

When Bitcoin fell to $17,600, there were 9.216 million BTCs in unrealized losses. After the capitulation event on June 18, after a month of consolidation, the price rebounded to $21,200, and the number of BTCs that are now in unrealized losses has dropped to 7.68 million.

Glassnode says:

“This suggests that 1,539,000 BTC were last traded (with a cost basis) between $17,600 and $21,200. This suggests that approximately 8% of the circulating supply changed hands in this price range.”

Further evidence that the capitulation has occurred is the "staggering amount of BTC" locked in realized losses during May and July.

Bitcoin’s 30-day cumulative realized losses Source: Glassnode

Terra’s collapse triggered a total of $27.77 billion in realized losses, while the June 18 plunge, which broke the all-time high for the 2017 cycle, resulted in a total of $35.5 billion in realized losses.

Is the bear market over?

A final indicator that capitulation has occurred is the adjusted spent output margin (aSPOR), which compares the value of output when it is spent versus when it is created.

Bitcoin’s adjusted SPOR. Source: Glassnode

According to Glassnode, when profitability declines (shown by the blue arrow), investors are realizing huge losses, culminating in a "final moment of cascading capitulation," as shown by the red arrow.

Glassnode says:

"The market has finally reached seller exhaustion, prices are starting to recover, and investor pain is starting to subside."

In order to verify that capitulation has indeed occurred, and that accumulation is taking place, Glassnode states that ideally the aSOPR value needs to return to above 1.0.