Bitcoin [BTC], at the time of writing, had creeped back above the key $70k resistance. It found a surge in demand around the $65k-zone over the weekend, despite the gloomy news across the wider market. However, despite the price bounce, Bitcoin is still trading a significant distance from the miner costs of $89k-$91k.
AMBCrypto previously reported that exchange flow dynamics revealed a bullish sign for the prices. The Inter-exchange flow pulse metric saw a bullish crossover, a development that has historically indicated early-cycle accumulation phases.
Could this be the start of the next powerful Bitcoin rally?
“Bitcoin is dead,” says Rainbow Chart
The Bitcoin Rainbow Chart is a long-term, logarithmic chart that maps out whether Bitcoin is overvalued or undervalued in the long-term. Some investors keep an eye on this chart to see if cyclical tops and bottoms are in.
At press time, BTC was trading in an extremely undervalued area. The purple region marked on the chart showed it was so cheap that it was considered the “Bitcoin is dead” zone.
Nowhere to go but up?
According to crypto analyst Axel Adler Jr’s observations, short-term holders have continued to realize losses. The STH supply fell from 6.06 million BTC to 5.92 million, meaning 140k left the cohort.
This could be due to capitulation. Held coins maturing (their ages crossed the 155-day STH threshold) also explained the STH supply drop.
The realized price, or the average cost-basis of all BTC in circulation, was at $89k. The market price was at $70k – A 21.3% gap. The analyst argued that such a gap has created a supply overhang for Bitcoin. Short-term holders at a loss would want to use rallies to sell their BTC without realizing a loss.
Finally, the LTH/STH SOPR metric showed that short-term holders were selling at a loss. Meanwhile, LTHs were not selling, but neither were they able to absorb the supply. The SOPR ratio was at 0.89.
At the 2018 and 2022 bear market bottoms, the metric had fallen to 0.48 and 0.50, respectively.
Therefore, calling a structural low here might be premature.
Final Summary
- Bitcoin’s Rainbow Chart showed that BTC was at extremely undervalued price levels.
- On-chain metrics hinted at a sizeable supply overhang all the way to $89k, and the current bounce may not be enough to call for a long-term low.
