Over the past weekend, Bitcoin experienced a significant rally in price, indicating a potential bottoming out of the crypto asset. The price of Bitcoin surged to $67,000, although it was currently at $64,000. This recovery comes after holders faced substantial losses in 2024, with on-chain metrics showing positive momentum in the short term.
CryptoQuant analysts revealed that BTC holders incurred losses of $2.5 billion in just two days last week, before the cryptocurrency rebounded and started climbing again. This could be a sign of seller capitulation, typically associated with market bottoms. Additionally, selling pressure from major entities such as the German government and Mt. Gox’s rehabilitation estate has decreased, hinting at a potential bottoming out.
Bitcoin traders’ unrealized profit margins have hit extremely low levels, marking the most negative since the collapse of the bankrupt crypto exchange FTX in November 2022. This signals a potential bottom, as the profit margin dropped to -17% last week and is currently at -5.7%. From a valuation perspective, analysts suggest that Bitcoin may have indeed bottomed out, with positive momentum in sight.
While indicators point towards a potential recovery for Bitcoin, there are still challenges ahead. CryptoQuant’s Bull-Bear Market Cycle indicator indicates that the market is in a bull phase, but demand for Bitcoin has yet to show significant growth. Positive and faster demand growth is crucial for a substantial price increase, but currently, Bitcoin’s demand remains stagnant. Additionally, stablecoin liquidity, particularly from USDT, is also lacking acceleration, with minimal monthly growth.
CryptoQuant’s analysis is echoed by Bitfinex, which warned that BTC might face further turbulence in the near future due to certain factors. While the signs of a potential bottoming out are evident, Bitcoin still needs to demonstrate stronger demand growth and stablecoin liquidity to pave the way for a new price rally towards fresh highs. It remains to be seen if Bitcoin can overcome these challenges and sustain its recovery in the volatile crypto market.