5 months ago 3 min read

Finding Bitcoin's Price Bottom


The crypto market was hit with volatility just a couple of days ago as it was sparked by the release of the September's CPI report. But the real question is, "Has Bitcoin reached the bottom?"

We are no stranger to the volatility of the market when it comes to the CPI press, and the previous one really did not disappoint. The Core CPI came in hotter than expected at 6.6% year-over-year and 0.4% month-over-month with shelter and medical services as key drivers. This has been one of the fastest change in the rate in terms of annual Core CPI since 1982.

Source: FRED

As for the rates, the latest implied federal funds rate from the EUD market shows a peak just above 5% in March 2023 before any rate cuts happen at the end of the year.

Source: Barchart.com / October 13 Intraday

Where is Bitcoin's Price Bottom?

It’s worth taking a look at some of the key bottom price levels to gauge where the price of Bitcoin may end up with the recent dump teasing the $18,000 mark. First, let’s look at the fixed volume range profile of Bitcoin since December 2018 bottom of last cycle. The overwhelming majority of traded volume in the market occurred right around $10,000. This is also considered a key psychological level. In a strong downward move, $10,000 is a place where many in the market have their spot cost basis and could start feeling some real drawdown pain or lack of conviction.

Source: TradingView

Next, let’s revisit the cyclical drawdown chart for Bitcoin in current and previous cycles in terms of bear market and cycle duration. We’re currently right around a 72.23% drawdown from an all-time high closing price of $67,589. Now, if we're going to see a max cycle drawdown come in less than the last two cycles — let’s say around 80% — then we’re looking at a price around $13,500. If we assume that this cycle and popping of valuations will be much worse like maybe around 85%, then we’re looking at a price around $10,100. The bull case is that we’ve found a durable bottom at $18,000 and we won’t see the max drawdown reach beyond 73%.

Source: Glassnode

From a perspective based on the on-chain, one of the more interesting realized price areas is the one held by the cohort of addresses that have 10-100 BTC. Recall that realized price is an estimate of the average cost basis based on the price when UTXOs last moved. This particular group accounts for around 22.6% of all circulating supply. This group would definitely reflect a decent portion of long-term holders and there’s a case to be made that in a deep, prolonged bear market, long-term holders have yet to feel the pain or capitulation that we’ve seen in the past.

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