Encouraging Signals for Bitcoin
Minimal decrease in Bitcoin supply: Unlike previous bear markets where more than 25% of the supply was in a loss zone, the current decline is only 9%. This indicates that recent sell-offs are more about taking profits than panic selling.
Mixed market conviction: Despite divergent opinions, the market remains uncertain about confirming a support level for Bitcoin. However, the current price pattern suggests a possibility of three consecutive daily closing prices moving upward at the beginning of September, a configuration not seen since early August.
Bitcoin’s Net Realized Profit/Loss (NRPL): Despite the recent decline, Bitcoin’s NRPL hasn’t turned red, reaching a one-month peak with $4.2 billion in net realized profits. This divergence from traditional bear markets suggests strong market conviction in Bitcoin.
A Healthy Correction, Not Capitulation
Current Bitcoin holders appear to be keeping their cool during the downturn, with only 9% of the BTC supply in a loss zone. Compared to previous cycles where more than 25% of the supply was in a loss zone, the current situation indicates remarkable resilience.
From a technical perspective, BTC has bounced off its liquidity zone in the 16H Volume Profile Order Blocks. Historically, this zone has always instilled bullish momentum toward new highs. The last times BTC retested these zones on the 16H timeframe were in January 2024 and August 6, 2024, local bottoms that pushed BTC toward new ATHs just weeks later.
In summary, the recent 11% drop in Bitcoin could simply be a healthy reset, reflecting the market’s conviction in the number one cryptocurrency and its ability to generate profits despite macroeconomic uncertainties.
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