Digital asset brokerage company K33 announced that the fact that more than half of the circulating supply in the Bitcoin market is in the loss zone may indicate that the bottom levels are approaching in the current cycle. According to the company’s report published on Tuesday, more than 50 percent of the Bitcoin supply in circulation is currently held below its cost.
Similar signal with past cycles
K33 notes that Bitcoin has often bottomed within weeks of hitting this threshold in previous market cycles. This indicator, which is closely watched by analysts, stands out as one of the criteria used to understand whether the selling pressure in the market has started to weaken.
K33 emphasizes that periods when more than half of the circulating Bitcoin supply is at a loss have historically coincided with the final stages of a bear market, and therefore the current outlook offers a notable signal of a cycle bottom.
According to the company’s data, after this signal occurred in the 2017 bear market, Bitcoin hit its bottom within 31 days. In November 2018, the same post-threshold bottom occurred within 23 days, and in November 2022, approximately 13 days later. The 2014 cycle diverged; At that time, the bottom occurred 101 days later, and a year after this signal, the Bitcoin price was 25 percent lower.
K33 evaluates that the uptrend in the last year has been more limited compared to previous bull markets, so the current downturn may not be as harsh as in the past.
ETF flows could change this cycle
The report noted that large-scale sales are among the factors that may cause this cycle to be different from past examples. In particular, the influence of spot Bitcoin ETF investors on the price can make historical comparisons more complicated. As a company that provides brokerage and research services to the digital asset market, K33 regularly monitors on-chain and derivative market data.
Spot Bitcoin ETFs recorded net inflows for two days in a row, according to data from Farside Investors. There was an inflow of $265 million into these products on Monday. On the other hand, total net outflow in June reached 4.51 billion dollars, and this period stood out as the weakest month on record.
The risk appetite indicator also draws a similar picture
The loss of supply is not the only data that points to a possible bottom in the market. The Risk Appetite Index tracked by Block Scholes offers a similar outlook. This index measures the strength of bullish and bearish trends in digital assets.
Mini dictionary: Risk Appetite Index is an indicator that measures the tendency of investors to turn to more volatile and higher risk assets. The index turning sharply negative indicates that hesitancy in the market has increased; The recovery coming from here indicates that the risk-taking tendency may become stronger again.
According to Block Scholes data, Bitcoin risk appetite dropped to minus 1.27 on July 3, then reacted upwards. In eight previous examples the company examined, the median spot return over the 100-day period following such a reversal was 12 percent.
A Block Scholes spokesperson states that such moves have historically prevented a stronger recovery in spot prices and can pave the way for greater allocation to risky areas such as crypto assets.
