Bitcoin Capitulation Signal Points to Possible Bear-Market Bottom
Summary
- On-chain indicators showed the ratio of UTXOs sold at a loss fell to the lowest level of this bear market, signaling capitulation.
- After a similar reading in mid-2023, when Bitcoin was at $26,000, the market rebounded, and the current period has also been a highly profitable buying zone for long-term investors.
- Still, a bottom will take time to form because of factors including long-term holder SOPR turning negative, weakening momentum, and a surge in exchange inflows from short-term holders.
Forecast Trend Report by Period
A surge in loss-taking by Bitcoin investors is signaling the market may be entering a bear-market bottoming phase.
Cointelegraph reported on June 28 that CryptoQuant contributor Darkfost, citing an analysis of Bitcoin unspent transaction output, or UTXO, data, said the ratio of UTXOs sold at a loss versus those sold at a profit has fallen to its lowest level of the current bear market.
"The first bottom signal of this correction has appeared," Darkfost wrote, adding that a sharp increase in investors willing to sell at a loss shows broader market capitulation is beginning.
He said the indicator points to a bear-market bottoming phase. The last time the ratio fell to this level was in mid-2023, when Bitcoin dropped to about $26,000, before the market rebounded.
Such periods have consistently been highly profitable buying zones for long-term investors, he said. They also tend to coincide with the point when most investors lose interest in the market and give up. Still, he added that the bottoming process will not end quickly because it takes time to develop.
Market analyst DurdenBTC, citing the same indicator, said the long-awaited bottom signal has appeared. The measure has identified every cycle low since 2016, he said. While the market may still feel extremely difficult over the next few weeks, he added, if this were a comfortable area to buy, the signal itself would not exist.
In a separate analysis, Darkfost said the spent output profit ratio, or SOPR, for long-term holders is also gradually turning negative, suggesting those investors are entering a capitulation phase as well. Even so, he said the current correction was driven in large part by a sharp increase in exchange inflows from short-term holders.
On-chain analytics firm Swissblock said Bitcoin has moved past the initial collapse phase but is still building a bottom. Prices are stabilizing, while momentum remains significantly weakened.
