Bitcoin Bears beware! Another key indicator is flashing a BTC buy signal
Flashing a Bitcoin buy signal is another key metric. According to Mohit Sorout, a popular crypto analyst and influencer, this is according to a tweet. Sorout claims that the DCA Indicator (which he calls “the mother of all BTC bullish signal”) flashed only for the fourth time.
DCA is a dollar cost average. This is a method used by crypto investors to buy a fixed amount every day in order secure a favorable average price. Sorout elaborates on the parameters of his indicator by explaining that the “daily DCA indicator tracks profit/loss of buyers, who hypothetically purchased a $ amount worth bitcoin each day for the past year (365).”
Bitcoin Market has Returned to Profitability – Bullish Sign
Another sign that Bitcoin’s recent price rise has brought it back to profitability is the DCA indicator. Analysts view the return to profitability of Bitcoin’s market after a long bear market and period of paper loss as a sign of an incoming bull.
The DCA Indicator signal is in line with two indicators that are closely followed by Glassnode, a crypto analytics firm. At the beginning of April, the 30-Day Simple Moving Average of the Bitcoin Realized Loss Ratio indicator (RPLR), moved above one. This means that the Bitcoin market is generating more profits (in USD) than losses from BTC sales.
Glassnode says that this indicator generally indicates that sellers have exhausted their losses and there is a stronger demand to absorb profits. This indicator is a bullish signal. The Bitcoin RPLR 30-day SMA moving above 1 after a long spell below (like November 2015 or April 2019) has historically led to a massive rally in the BTC prices.
The Adjusted Spot Output Profit Ratio (aSOPR), which measures the amount of realized profit or loss for all coins on-chain, also recently exceeded 1, signifying that the market is profit. The aSOPR’s rise above 1 after a long period below it has been an excellent buy signal.
Another market profitability indicator, CryptoQuant, another crypto analytics company, gives off a definitive buy signal. This is the first time this has happened since 2019.
To a Laundry list of bullish signals, add the DCA indicator
The DCA indicator is one of a growing number of technical and on-chain metrics that flashes a bullish signal. These two Glassnode indicators were used by the cryptocurrency company in its popular “Recovering From a Bitcoin Bear” dashboard. This dashboard is used by crypto firm’s analysts to determine if Bitcoin is in the process or not of moving from a bearish market to a bull market.
The dashboard monitors eight indicators that determine whether Bitcoin is trading above key pricing model, network utilization momentum, market profitability, and whether long-term HODLers have more Bitcoin wealth than the short-term HODLers. Seven of the eight indicators are currently showing green, and the eighth indicator might soon signal a bullish signal.
BTC’s trading position compared to key pricing models has seen a significant increase this year. It is now above its 200-Day Moving average and Realized price, which are both just below $20,000 each, which is a double bullish sign for the technical side. A recent technical buy signal that excited bulls was Bitcoin’s seventh “gold cross” within the past 10 years. The number of Bitcoin wallet addresses with a balance above zero has risen to an all-time high. This is a sign that investors are coming in large numbers.
Glassnode also tracks other on-chain indicators, such as Bitcoin’s Reserve Risk. As discussed in this article, the MVRVZ-Z score which “compares market and realized value to determine when an asset has been overvalued or undervalued”, is another screaming bull signal. This indicator recently recovered from a prolonged decline to zero, which is a characteristic of bull markets.
Bulls can also take solace in the analysis of market cycles that the largest cryptocurrency market capitalization has ever followed. Crypto-focused Twitter account @CryptoHornHairs discovered that Bitcoin is almost following the same path as a roughly 4-year market cycle, which has been well-respected for more than eight years.
A widely-used Bitcoin pricing model is telling a similar story. The Bitcoin Stock-to Flow pricing model predicts that the Bitcoin market cycle will last approximately four years. Prices typically bottom somewhere near the middle of the four year gap between “halvings”. This is because the Bitcoin halving, a four-yearly phenomenon in which the mining reward is halved, slows down the Bitcoin inflation rate, is widely followed. The past price history of Bitcoin suggests that the next major surge in Bitcoin will occur after the next halving, which is expected to take place in 2024.
All of this being said, it is perhaps not surprising that Bitcoin continues to defy macro-headwinds. This includes the recent rise in the US dollar, and US bond yields, driven by Fed tightening expectations following recent hawkish communications by policymakers in response to the string of strong tier 1 US data releases.