Since last weekend, the price of bitcoin (BTC) has rallied significantly, signaling that the crypto asset may have bottomed out. Bitcoin has recovered to a high of $67,000, although it was hovering around $64,000 at the time of writing. This comes after holders realized their largest losses so far in 2024.

CryptoQuant analysts said on-chain metrics suggest positive momentum in the near term; however, it may not be sustainable as stablecoin liquidity and Bitcoin demand have recorded little to no growth.

Bitcoin May Have Bottomed Out

CryptoQuant found that BTC holders realized losses of $2.5 billion in two days last week, shortly before the cryptocurrency rebounded and moved up. This could be indicative of seller capitulation, usually associated with price bottoms.

Another sign that bitcoin may have bottomed out is the decline in selling pressure from large entities, including the German government and the rehabilitation estate of the defunct crypto exchange Mt. Gox. The former has run out of BTC to sell, and the latter has moved its holdings to exchanges to kickstart the distribution process to creditors.

In addition, Bitcoin traders’ unrealized profit margins have reached extremely low levels, the most negative since shortly after the collapse of the bankrupt crypto exchange FTX in November 2022. This figure plunged as low as -17% last week and is currently at -5.7%. This is usually a sign that prices have bottomed out.

“From a valuation perspective, the price of Bitcoin seems to have also bottomed out, and indicators suggest positive momentum. CryptoQuant’s P&L Index bounced off its 365-day moving average (red circles), which indicates price may have found a local bottom and it could continue to increase,” the analysts wrote.

The Catch

Although CryptoQuant’s Bull-Bear Market Cycle indicator shows that the market is still in a bull phase, Bitcoin demand has yet to start growing again to pave the way for a new price rally that would lead to fresh highs. Positive and faster demand growth is needed for a substantial increase; however, Bitcoin’s demand is still below zero.

Likewise, stablecoin liquidity, particularly from Tether’s USDT, is yet to accelerate. The monthly growth of the stablecoin is still near 0%; faster growth is needed for continuous price increases.

CryptoQuant’s analysis aligns with that of Bitfinex, which stated that, due to certain factors, BTC could witness more bloodshed in the near term.

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