The $20,000 price is scary, but it may not be the end of the story for Bitcoin’s latest bear cycle.
Bitcoin (BTC) nearing $20,000 worries markets, but after narrowly avoiding a breakout of support, is the worst really over?
Based on multiple on-chain metrics, it appears that the greatest pain has not yet reached this cycle.
The stakes are high for many hodlers this week — nearly 50% of the supply is in the red, and miners are ramping up shipping BTC to exchanges.
Even some of Bitcoin’s biggest investors, notably MicroStrategy, have had to defend their belief in BTC as price action plummeted.
With a price target as low as $11,000, Cointelegraph looks at how much the market needs to fall technically to match the historic bottom area.
Weak Hodlers Still have to Be Eliminated
Despite falling to an 18-month low, Bitcoin price action has yet to shake all speculators. Based on the RHODL ratio of Philip Swift, creator of on-chain analytics resource LookIntoBitcoin, there should be more capitulation.
This is because historically, the ratio between short-term and long-term holders favors the latter during macro price bottoms.
RHODL specifically uses the ratio between the 1-week and 1-2 year cohorts of the Realized Cap HODL Waves indicator, which divides tokens by the time they were last moved (weighted by real price).
Essentially, once the green area of RHODL appears, it indicates that capitulation is peaking and that a price floor is imminent or has been set. Data from on-chain analytics firm Glassnode shows that so far, RHODL has not entered its green zone.
Bitcoin Supply Percentage in Loss Chart
It may feel like the entire Bitcoin market is in the red, but above $20,000, many are still holding potentially modest gains in hopes of a rebound.
Another on-chain analytics platform, CryptoQuant, revealed that as of June 16, only 46% of the total BTC supply was in the red.
That’s an impressive statistic in itself, but not enough to call it a macro capitulation event if historical patterns are taken into account.
According to CryptoQuant, at least 60% of the supply needs to incur unrealized losses to be called a capitulation — as was the case in March 2020, late 2018 and earlier.
CryptoQuant CEO Ki Young Ju pointed out the importance of BTC/USD recovering its real price last week. This event lasted for two years, indicating that the spot price was below the average price of all coins in the last move.
“It’s been 2 years since the big sell-off in March 2020,” he commented at the time.
Miners not Surrendering Despite ‘Impressive’ Exchange Traffic
Although their production cost may be closer to $30,000 than $20,000, Bitcoin miners have yet to start paying fees by selling hoarded BTC. However, Cointelegraph recently reported that coins are moving to exchanges at their highest rate in seven months.
As a result, the Bitcoin network hash rate has yet to experience a severe drop, which is common during times of intense price pressure.
The lack of trend is confirmed by the Hash Ribbon indicator, created by Charles Edwards, CEO of asset management firm Capriole.
Hash Ribbons use 30-day and 60-day hash rate moving averages to determine when miner capitulation occurs. Once the 30-day rally crosses the 60-day, it can be assumed that the “worst” is over as miners return to work.
So far, that crossover hasn’t happened, which historically means the greatest pain may be right around the corner.
“Impressive Bitcoin miner transaction flow,” economist, trader and entrepreneur Max Krueger also commented on this week’s miner activity:
“Many miners are in the throes of BTC in their teens, panicking yesterday in anticipation of a 20k breakout makes sense.”