Bitcoin Supply Loss May Signal a Price Reversal Soon, CryptoQuant Data Suggests
The price of Bitcoin has been on a downward trend since reaching an all-time high of over $69,000 in November 2021. However, some analysts believe that the market may be close to a turning point, based on a metric called Supply Loss Percent.
Supply Loss Percent is a measure of how much Bitcoin supply has been lost, either due to being locked in long-term storage, burned, or inaccessible. According to CryptoQuant, a platform that provides on-chain data and analytics for cryptocurrencies, this metric can indicate when the market is oversold and ripe for a rebound.
The chart below shows the historical relationship between Supply Loss Percent and Bitcoin price. As can be seen, whenever the metric reaches a peak of around 23%, it tends to drop sharply afterwards, followed by a rise in price. This pattern has occurred three times in the past cycles, most recently in December 2020, when Bitcoin began its rally from $20,000 to $60,000.
Currently, the Supply Loss Percent is at 20.87%, which is close to the previous peaks. If the same scenario repeats, the price of Bitcoin could reverse soon and reach between $36,000 and $37,000, which is the range of the previous reversal points.
Another chart from CryptoQuant shows that the selling pressure from the United States, which was the main factor behind the price decline, is gradually diminishing. In the current range, there is a high likelihood of a rapid price recovery.
Another factor that supports this bullish outlook is the average cost basis of short-term Bitcoin holders, which is the average price at which they bought their coins. According to CryptoQuant, this metric is currently at around $35,000, which means that most of the short-term holders are either at breakeven or in profit. This implies that they have less incentive to sell at a loss and more likely to hold or buy more, creating a strong support level for the price.
Of course, there are other factors that could affect the price of Bitcoin, such as regulatory developments, institutional adoption, and market sentiment. However, the Supply Loss Percent and the average cost basis of short-term holders are two indicators that suggest that the market may be nearing a bottom and ready for a recovery. Investors and traders should keep an eye on these metrics and watch for any signs of a reversal in the coming days or weeks.
- How Bitcoin’s MVRV Ratio Can Help Investors Spot Market Trends
- CryptoQuant: GBTC Selling Pressure Could Last Until April