Bitcoin [BTC] has experienced minor losses in recent trading sessions, with its spot ETF inflow streak—the longest in nine months—broken by a $225.1 million outflow on Thursday, July 23. The cryptocurrency continues to trade within a long-term bearish price trend, as the bulls failed to break past the $67,000 local supply zone, handing control back to the bears.

MVRV Ratio and Realized Losses

The Market Value to Realized Value (MVRV) ratio is a critical on-chain metric that compares the market capitalization of Bitcoin to its realized capitalization. When the MVRV ratio is above 1, it indicates that the aggregate holder is in profit. Historically, the depths of bear markets have only been reached when the MVRV falls below 1. Crypto analyst Rei Researcher has noted that this has not yet occurred in the current cycle. The market is far from the overheated territory that typically precedes a bull market peak, but it is also not quite at the bottom of a bear market. This suggests that the cyclical capitulation phase may not be over.

On-chain data shows that the recent bounce may have provided an opportunity for some long-term holders to reduce their exposure ahead of any further weakness. The MVRV ratio currently hovers around 1.8, well above the 1.0 threshold that historically signaled bear market bottoms. However, it is also far below the 3.5+ levels seen during previous bull market peaks, indicating that the market is in a transitional state.

Supply in Profit and LTH SOPR

Analyst The Chess Onchain observed that the Bitcoin supply in profit is currently at 57.5%. For a reliable mark of the end of a bear trend, the 30-day average of the long-term holder spent output profit ratio (LTH SOPR) must reclaim 1.0. This metric is currently at 0.86. Using historical data as a benchmark, the supply in profit metric needs to reach at least 64% and remain above that level for several weeks before any price recovery can be considered as happening within a bullish regime. Until then, any upward movement is likely to be part of a bear market relief rally.

The LTH SOPR measures whether long-term holders are selling at a profit or loss. A value below 1 indicates that holders are selling at a loss on average, which is characteristic of bear markets. The current reading of 0.86 suggests that long-term holders are still realizing losses, a sign that selling pressure may continue.

Exchange Inflows and Supply Overhang

Additionally, when the price bounce began in early June, the proportion of Bitcoin older than six months that flowed into exchanges spiked to 12%-16% of total exchange inflows. This metric has since fallen to 0.8%, indicating that the selling pressure from older coins has subsided for now. However, a cohort of holders who bought between one month and two years ago have their cost basis in the $72,000 to $102,000 window. This supply overhang represents a significant threat to any sustained recovery. If Bitcoin fails to break above this cost basis quickly, these holders may be forced to sell, leading to another wave of selling and deeper capitulation.

This dynamic is similar to what occurred in the 2018-2019 bear market, where a large supply of coins purchased near the all-time high created resistance that took months to break through. In the current cycle, the Bitcoin price has repeatedly tested the $67,000 level but failed to establish it as support. The failure to break above this zone has reinforced bearish sentiment.

Historical Context and Market Cycles

Bitcoin has historically followed a four-year cycle driven by halving events. The most recent halving occurred in April 2024, which traditionally leads to a bull market peak approximately 12-18 months later. However, on-chain data suggests that the current cycle may be different. Unlike previous cycles, where the MVRV ratio dropped below 1 during the bear market bottom (e.g., 2015, 2018, 2022), the current cycle has not seen such a low. This could mean that the bottom has not yet been reached, or that the structure of the market has changed due to the introduction of spot ETFs and institutional participation.

Another key metric is the Bitcoin Puell Multiple, which compares the daily issuance value of Bitcoin to its 365-day moving average. This multiple is currently below 0.5, a level that has historically been associated with buying opportunities. However, it has not yet hit the extreme lows seen during previous bear markets. Similarly, the Bitcoin Fear and Greed Index remains in the fear zone, suggesting that sentiment is not yet at the levels that typically precede a major reversal.

The realized cap HODL waves show that a significant portion of Bitcoin supply is still held by short-term speculators, which adds to market volatility. In a typical bull market, older coins gradually move onto exchanges to be sold, but the current pattern suggests that many holders are waiting for higher prices. This stubbornness could lead to a protracted period of sideways movement or another sharp sell-off.

Macroeconomic Factors

External macroeconomic conditions also play a crucial role. The U.S. Federal Reserve's interest rate decisions, inflation data, and the performance of traditional markets all impact Bitcoin's price. Recent concerns about a potential recession have led to a flight to safe-haven assets like gold, bypassing Bitcoin. The strong correlation between Bitcoin and the tech-heavy Nasdaq index has diminished somewhat, but Bitcoin still reacts to global liquidity conditions. If central banks begin cutting rates aggressively, risk assets could see a boost, but until then, the bearish pressure remains.

The on-chain data reinforces the idea that Bitcoin has not yet confirmed a bull market reversal. The combination of a MVRV ratio that is neither oversold nor overbought, supply in profit below the 64% threshold, and a long-term holder SOPR still below 1 paints a picture of an asset in a transitional phase. While there are glimmers of hope for the bulls, such as the recent ETF outflows turning into inflows on other days, the overall trend remains bearish until proven otherwise.

Investors and traders should monitor these metrics closely. A sustained break above $72,000 with a corresponding increase in LTH SOPR above 1.0 could signal a shift in sentiment. Conversely, a drop below the $53,000 support would likely trigger the next wave of selling. The data suggests caution is warranted, and the market may need several more weeks or months of consolidation before a true bullish reversal can be confirmed.

Source:AMBCrypto News