January 27, 2023

After a November whirlwind for Bitcoin (BTC), certain on-chain and Bitcoin price stats suggest that BTC’s bottom could happen in December. In the latest report from Capriole Investments, they provide analysis on how to find the bottom of Bitcoin. When taking into account realized value, miner capitulation, mining electricity costs, number of downdraws and record hodlers, a BTC floor of $16,600 – $16,950 appears to have been formed.

Here are five reasons why Edwards believes Bitcoin price is moving closer to a cycle bottom.

SLRV ribbons flash a buy signal

The SLRV ribbons track investment flows by combining the 30-day and 150-day moving averages with the SLRV ratio, a percentage of Bitcoin moved in 24 hours divided by BTC held for 6-12 months.

Bitcoin SLRV ribbons. Source: Glassnode

According to Charles Edwards, the SLRV ribbons outperform the BTC HODL strategy, making it a strong indicator of where BTC price could go.

While the SLRV ribbons were bearish in 2022, the recent move towards $16,600 turned the indicator into bullish. According to Edwards, the change creates a buy signal for investors and institutional funds still in the market, building a strong case for Bitcoin’s price floor.

BTC price falls below global electricity cost

While it is well known that a large number of Bitcoin miners are currently losing money, this is not a rare phenomenon in BTC history.

Bitcoin miners’ total cost of production includes mining hardware, operational costs, capital costs, variable rate energy contracts, and other factors, while electrical costs only take into account the raw electricity used to mine BTC.

Bitcoin Production Cost and BTC Electricity Cost. Source: Glassnode

Raw electric costs have traditionally been a Bitcoin floor, as it is rare for BTC to trade below this price. Historically, Bitcoin has traded below electric costs only four times, the most recent being on November 10 when Bitcoin’s electric costs hit $16,925.

BTC miner sales hit a peak

Miners are still losing money with production costs above Bitcoin’s spot price. This dichotomy forces miners to sell Bitcoin to stay afloat.

The current Bitcoin miner sales level is the third largest in history, while the other two events occurred when BTC was $2.10 in 2011 and $290 in 2015.

Miner BTC selling pressure, top events. Source: TradingView

In hindsight, investors would like those prices back and Edward’s suggests that the current BTC price could represent a similar value.

Bitcoin Hash Ribbons confirm another miner capitulation

The bitcoin miner capitulation involves miners shutting down their ASICs that are no longer profitable and selling portions of their Bitcoin reserves to cover costs.

According to Capriole Investments, during miner capitulations, a price floor forms before the hash rate starts to improve. As indicated in the chart below, another capitulation of miners occurred on November 28, and if the analysis is correct, this would put Bitcoin’s bottom at around $16,915 as the hash rate started to drop after the November 28 date. to rise.

Hash ribbons for Bitcoin mining. Source: TradingView

Related: Bitcoin clings to $17K as ARK marks ‘historically significant capitulation’

All-time high Bitcoin hodling despite historic price drop

A metric used to analyze Bitcoin hodler behavior is the Long-term Holder Net Unrealized Profit and Loss (NUPL) tracker.

In the history of Bitcoin, the NUPL statistic has only shown such a large drop four times.

Bitcoin NUPL metric. Source: Glassnode

The previous times such large declines have represented valuable Bitcoin purchases for investors. Edwards suggests that if investors view the BTC price as undervalued, their choice to accumulate could further solidify Bitcoin’s bottom.

Another trend is forming as the hodlers metric reaches peak numbers over the long term. Currently, 66% of Bitcoin’s supply is held by long-term hodlers, meaning they have held their Bitcoin for over a year.

According to Edwards, this behavior is in line with shifting macro markets.

While the markets are still highly correlated with stocks and vulnerable to macro market shifts, multiple data points indicate that Bitcoin could be in the final stages of a bottoming process.