Bitcoin (BTC) may see more pain in the near future, but most of the bear market is already “probably” behind it.
That’s one of many conclusions from Philip Swift, the popular on-chain analyst whose data resource, LookIntoBitcoin, tracks many of the best-known Bitcoin market indicators.
Swift, who along with analyst Filbfilb is also a co-founder of trading suite Decentrader, believes that despite the current pressure on prices, it is not long before Bitcoin breaks out of its latest macro bearish trend.
In a new interview with Cointelegraph, Swift revealed insights into what the data is telling analysts and, as a result, what traders should pay attention to.
How long will the average hodler have to wait until the tide turns and Bitcoin returns from two-year lows?
Cointelegraph (CT): You have he pointed that some on-chain metrics like HODL Waves and RHODL Ratio are hinting at a BTC bottom. Could you expand on this? Do you trust that history will repeat this cycle?
Philip Swift (PS): I think we are now at the point of maximum opportunity for Bitcoin. There are numerous key metrics on LookIntoBitcoin that indicate we are at the lows of the major cycles.
We are seeing the percentage of long-term holders at their peak (1-year HODL wave), which usually occurs in the depths of the bear market, as these long-term holders do not want to take profits until the price rises.
This has the effect of restricting the available supply in the market, which can cause the price to rise when demand finally picks up.
We are also seeing metrics like RHODL Ratio dip into their accumulation zones, showing just how far the euphoria has been drained from the market. This removal of positive sentiment is necessary for a lower range to form for BTC.
RHODL Ratio highlights that the cost basis of recent Bitcoin purchases is significantly lower than the prices paid 1-2 years ago when the market was clearly euphoric and expected more than $100k for Bitcoin. So it can tell us when the market has reset in preparation for the next cycle to start.
CT: How is this bear market different from previous BTC cycles? Is there any positive side?
P.S: I was around the 2018/19 bear market and it actually feels pretty similar. All the tourists are gone and only passionate and committed crypto people remain in the space. These people will stand to benefit the most in the next bull run, as long as they don’t go crazy trading on leverage.
In terms of positives, I have a couple! First of all, we are actually on a fair path through the market cycle, and we are probably through most of this bear market by now. The chart below shows how Bitcoin has performed in each cycle since the halving, and we are already close to the capitulation points of the previous two cycles.
Second, the macro context is very different now. While it has been painful for the bulls to see Bitcoin and cryptocurrencies being so strongly correlated with struggling traditional markets, I think we will soon see a bid for Bitcoin as confidence in (major) governments crosses down past a point of no return.
I believe that this lack of trust in governments and their currencies will create a race to private “hard” assets, with Bitcoin being one of the main beneficiaries of that trend in 2023.
CT: What other key on-chain metrics would you also recommend keeping an eye on to spot the bottom?
P.S: Beware of Twitter personalities showing Bitcoin on-chain charts cut off by exotic/strange variables. Such data rarely adds genuine value to the story shown by the top key metrics and these personalities only do it as a way to get attention rather than genuinely trying to help people.
Two metrics that are particularly useful in current market conditions:
The MVRV Z-Score is an important and widely used metric for Bitcoin. It shows Bitcoin price extremes moving above or below its realized price. The realized price is the basis of the average cost of all Bitcoin purchased. Therefore, it can be considered as an approximate equilibrium level for the market. The price only falls below that level in extreme bear market conditions.
When it does, the indicator on this chart dips into the green “accumulation” zone. We are currently in that zone, which suggests that these may be very good levels for the long-term strategic investor to accumulate more Bitcoin.
The Puell Multiple Look at miner earnings against their historical norms. When the indicator dips into the green accumulation band, like now, it shows that many miners are under significant stress. This often occurs at major Bitcoin cycle lows. This indicator suggests that we are close to a major cycle bottom for Bitcoin if we have not yet bottomed.
CT: Your fellow analyst Filbfilb expects BTC to turn around in Q1 2023. Do you agree?
P.S.: Yes. I think traditional markets will probably have a bit more of a downturn in early 2023. Worst case scenario, I see crypto struggling until then, so probably another 2-3 months at most. But I think most of the fear will soon shift to governments and their currencies, rightly so. So I expect private assets like Bitcoin to outperform in 2023 and surprise a lot of the damned who say Bitcoin has failed and is going to zero.
Related: Bitcoin Analyst Who Called 2018 Bottom Warns ‘Bad Winter’ May See $10K BTC
CT: October is a historically bad month for stocks, not so much for Bitcoin. How long do you expect BTC to be in sync with risk assets and what will be the catalyst?
P.S.: Bitcoin has been a useful forward-looking indicator of risk for the markets for much of 2022. What will change in 2023 is that market participants will appreciate [that] in fact, most of the risk lies with governments, not traditionally defined “risk” assets. As a result, I expect a narrative shift that will benefit Bitcoin next year.
The UK government’s actions around its mini-budget two weeks ago were a key turning point for that potential narrative shift. The markets showed that they were prepared to show their disapproval of bad policy and incompetence. I expect that trend to accelerate not only in the UK but also in other countries.
CT: Are you surprised by the poor performance of Ethereum after the merger? Are you bullish on ETH in the long run with its supply burning mechanisms?
P.S.: ETH had a strong short-term narrative with the Merger, but it was within the context of a global bear market. So it’s not surprising that its price performance has been lackluster. Ultimately, general market conditions held sway, which was to be expected.
In the long run though, Ethereum is set to do exceptionally well. It is a critical component of Web3, which is growing exponentially. So I am very bullish on Ethereum for the next two years.
CT: What is the best jurisdiction for a Bitcoin/crypto trader today?
P.S.: A place that is low tax and crypto friendly. I personally think Singapore is great and there is a growing crypto scene here which is also a lot of fun. I have friends who are in Bali, which also sounds great and is more affordable.
CT: Anything you want to add?
P.S.: Resist any temptation to abandon cryptocurrencies near the bottom of the bear market. Just be patient and use some good tools to help control your emotions.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.