Bitcoin On-Chain Analysis: Three Bitcoin Indicators at Key Support Levels

Our Bitcoin on-chain analysis today looks at three indicators that are currently at key support levels. Overview for signal Bitcoin may bottom, recover and end downtrend.

Dormancy Flow

The Dormancy Flow indicator represents the ratio of the current market capitalization to the Bitcoin price. According to the chart below, the value is expressed in USD. The indicator will help the analyst to identify the bottom of the BTC price when it enters the green zone below $250,000.

Currently, the Dormancy Flow has moved down to the green zone of $242,000 today. According to historical data, this area has only achieved twice in the past 2 years.

1 glassnode studio bitcoin entity adjusted dormancy flow
Glassnode hibernation time graph

In both previous cases, this coincided with the macro bottom of the BTC price. Bitcoin first hit $4,000 during the COVID-19 crash in March 2020. Second, Bitcoin bottomed out at $29,000 in July 2021. In the second, BTC price corrected 55% against all-time high in April 2021.

Today, Bitcoin is at $42,000 and Dormancy Flow is giving a similar signal. If the indicator bounces off the green support area, it is possible that BTC price continues to rally violently. This judgment is based on the history that occurred in the previous two cases.

Reserve Risk Indicator

The Reserve Risk indicator is defined as the HODL price/budget. It is used to gauge the confidence of long-term holders regarding the price of Bitcoin. When reliability is high and price is low, there is an attractive risk/reward ratio for the investment (Low Reserve Risk). When reliability is low and price is high, the risk/reward ratio is not attractive (Ranking risk is high).

The current Reserve Risk value reaches the upper part of the green area, with a value of 0.0027. Through observation, the Reserve Risk indicator is similar to the Dormancy Flow indicator. Historically, these times have marked good areas to buy Bitcoin. This is seen as where the risk/reward ratio is favorable.

Interestingly, these values ​​acted as support during the 2012-2013 bull market (green ellipse). A bounce at this level is a signal for parabolic bullishness.

2 glassnode studio bitcoin reserve risk
Glassnode Reserve Risk Chart

Bitcoin is still falling!!!

However, there is also another interpretation of this chart that offers a certain bearish scenario. For example in the previous two cycles, Reserve Risk bounced when it hit the ascending support line (red). At that time, Bitcoin reached its peak without breaking this line. When the support area is lost (red circle), this is a signal for a bear market.

This indicates that such a support line also applies to this cycle. At the same time, the resistance line was broken in early December 2021. If we interpret this event similarly to the previous two cycles, then Bitcoin has entered a bear market.

Indicators UTXOs in Profit

The final indicator for today’s series analysis is UTXOs in Profit (Unspent Transaction Output in Profit). This indicator shows how low or low the percentage of unspent trading profits is currently. In other words, it is one of the indicators by which you can tell the profit percentage of BTC holders.

As with the two indicators described above, today’s UTXOs in Profit are also at an important point and are heading for the 83% zone (green line). This level acted as support during the September-October 2020 BTC price correction, right before the parabolic rally. Bitcoin is then in the $10,000 region.

In the latter case, this support held at the end of July 2021. The indicator had the aforementioned correction against ATH in April 2021. At that time, Bitcoin price bottomed out at $29,000. .

Today, this indicator is in a similar area. Holding it could be another signal that the $40,000-$42,000 region will act as BTC’s next macro bottom before the rally resumes.

3 glassnode studio bitcoin percent of utxos in profit
UTXO in Glassnode Profit chart

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The source: https://nguyendiep.com
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