Bitcoin (BTC) could be in the process of pulling back after rallying 25%, based on several market signals.
The price of BTC is up almost 25% after dropping to around $17,500 on June 18. The upside correction followed a 75% retracement when measured from the November 2021 high of $69,000.
BTC/USD daily price chart. Source: TradingView
The recovery appears modest, however, carries risks of continuing to the downside due to the prevailing macroeconomic headwinds (rising prices, inflation, etc.)
But some widely tracked indicators paint a different scenario, indicating that the odds of Bitcoin dropping from current price levels are slim.
This spike in “oversold”
The first sign of a Bitcoin macro bottom comes from the weekly Relative Strength Index (RSI).
Notably, the weekly RSI for BTC has become “oversold” after dropping below 30 in the week of June 13. This is the first time that the RSI has slipped into the oversold territory since December 2018. Interestingly, Bitcoin ended a bear market rally in the same month and rose more than 340% in the next six months to $14,000.
In another case, Bitcoin’s weekly RSI fell towards 30 (if not lower) in the week of March 9, 2020. This also coincided with the price of BTC dropping below $4,000 and then rising to $69,000 by November 2021, As shown below.
A weekly price chart for the Bitcoin/USD pair featuring the bottom relationship between the RSI and the market. Source: TradingView
Bitcoin price has similarly rebounded since June 18, opening the door to a repeat of its history of parabolic highs after the “oversold” RSI signal.
Bitcoin NUPL jumps above zero
Another sign of a potential macro bottom for Bitcoin comes from the Unrealized Net Profit and Loss (NUPL) indicator.
NUPL is the difference between market value and realized value divided by market value. It is represented as a ratio, where a reading above zero means that the investors are winning. The higher the number, the higher the profit for the investors.
Related: Bitcoin Must Close Above $21.9K To Avoid New BTC Price Collapse – Trader
On July 21, Bitcoin NUPL surged above zero when the price fluctuated around $22,000. Historically, this reversal has been followed by massive spikes in the price of Bitcoin. The chart below shows the same thing.
BTC/USD vs. NUPL performance since 2009. Source: CryptoQuant
The third sign of Bitcoin making a macro bottom comes from another on-chain indicator called Puell Multiple.
Puell Multi examines mining profitability and its impact on market prices. The indicator does this by measuring the percentage of daily coin issuance (in US dollars) and the 365-day moving average of daily coin issuance (in US dollars).
Bitcoin Bill Multiple. Source: Glassnode
Puell Multiple’s strong reading shows mining profitability is high compared to the annual average, which indicates that miners will liquidate their Bitcoin vault to maximize revenue. As a result, higher Puell Multi is known to coincide with macro peaks.
Conversely, the lower Puell’s multiple reading means that miners’ current profitability is below the annual average.
Thus, rigs with break-even or below-zero revenue from bitcoin mining will risk shutting down, giving up market share to more competitive miners. Historically, the expulsion of weaker miners from the bitcoin network has reduced selling pressure.
Interestingly, Puelle’s multiple reading as of July 25 is in the green box and is similar to the levels observed during the March 2020 crash, as well as the 2018 and 2015 price lows.
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