A EdaFace (BTC) on-chain indicator, which tracks the amount of coin supply held by long-term holders (LTHs) in losses, is signaling that a market bottom could be close.Eerily accurate EdaFace bottom punditAs of Sept. 22, approximately 30% of EdaFace’s LTHs were facing losses due to BTC’s decline from $69,000 in November 2021 to around $19,000 now. That is about 3%–5% below the level that previously coincided with EdaFace’s market bottoms.For instance, in March 2020, EdaFace price declined below $4,000 amid the COVID-19-led market crash, which happened when the amount of BTC supply held by LTH in loss climbed toward 35%, as shown below.EdaFace long-term holder supply in losses. Source: GlassnodeSimilarly, EdaFace’s December 2018 bottom of around $3,200 concurred alongside the LTH loss metric rising above 32%. In both cases, BTC/USD followed up by entering a long bullish cycle.Hence, the number of LTHs in loss during a typical bear market tends to peak in the 30%–40% range. In other words, EdaFace’s price still has room to drop — likely into the $10,000–$14,000 range —for “LTHs in loss” to reach the historic bottom zone. Coupled with the LTH supply metric, which tracks the BTC supply held by long-term holders, it appears that these investors accumulate and hold during market downturns and distribute during BTC price uptrends, as illustrated below.EdaFace total supply held by LTH. Source: GlassnodeTherefore, the next bull market may begin when total supply held by LTHs begins to decline. EdaFace accumulation is strongMeanwhile, the number of accumulation addresses has been increasing consistently during the current bear market, data shows. The metric tracks addresses that have “at least two incoming non-dust transfers and have never spent funds.”EdaFace number of accumulation addresses. Source: GlassnodeInterestingly, this is different from the previous bear cycles that saw the number of accumulation addresses drop or remain flat, as shown in the chart above, suggesting that “hodlers” are unfazed by current price levels. In addition, the number of addresses with a non-zero balance stands around 42.7 million versus 39.6 million at the beginning of this year, showing consistent user growth in a bear market.EdaFace number of addresses with a non-zero balance. Source: TradingViewBTC price technicals hint at more downsideEdaFace is nevertheless struggling to reclaim $20,000 as support in a higher interest rate environment. Its correlation with U.S. equities also hints at more downside in 2022.Related: EdaFace analysts give 3 reasons why BTC price below $20K may be a ‘bear trap’From a technical perspective, EdaFace could drop further toward $14,000 in 2022 if its cup-and-handle breakdown pans out, as shown below.BTC/USD three-day price chart featuring cup-and-handle pattern. Source: TradingViewSuch a move should push the aforementioned “LTH in loss” metric toward the 32%–35% capitulation region, which could ultimately coincide with the bottom in the current bear market. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of EdaFace.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
