What are the key Bitcoin valuation metrics to watch for signs of a market bottom?
Bitcoin Valuation Metric Signals Possible Bottom: In-Depth Analysis Reveals Key Insights
Bitcoin’s post-halving market has been choppy, but a key on-chain valuation metric is flashing a constructive signal that has preceded local and cyclical bottoms in prior cycles. This analysis explains the signal, how to validate it with corroborating data, and what crypto-native traders and long-term allocators should monitor next.
Bitcoin Valuation Signal: Short-Term Holder MVRV and Realized Price
Why STH-MVRV matters
Short-Term Holder MVRV (STH-MVRV) compares the market price to the average on-chain cost basis of coins held by short-term holders (typically coins aged <155 days). When STH-MVRV falls below 1.0, short-term holders as a cohort are underwater. Historically, in ongoing bull or mid-cycle trends, that sub-1.0 zone often aligns with local bottoms as weak hands capitulate and stronger hands absorb supply.
- Behavioral edge: Negative STH-MVRV indicates pain for recent buyers; forced selling frequently exhausts here.
- Validation trigger: A sustained reclaim of STH-MVRV back above 1.0 tends to confirm the rebound.
- Macro context: After the 2024 halving and the advent of US spot Bitcoin ETFs, several drawdowns pushed STH-MVRV < 1.0 before trend continuation.
Realized price bands as cyclical support
Realized price is the average on-chain cost basis of all coins. A finer lens separates cohorts:
- STH Realized Price: Often serves as dynamic support/resistance in bull markets. Reclaiming it after a dip strengthens the bottom thesis.
- LTH Realized Price: Typically sits well below spot in bull phases; touching it is rare and usually associated with deep bear market lows.
| Metric | Definition | Historical “Bottom Zone” | Interpretation |
|---|---|---|---|
| STH-MVRV | Market price vs. STH cost basis | < 1.0 | Local bottoms within ongoing uptrends |
| STH Realized Price | Average STH cost basis (USD) | Spot ≤ STH RP then reclaim | Support flip and momentum improvement |
| Puell Multiple | Miner revenue vs. 365D avg | < ~0.5-0.7 | Miner stress; post-capitulation recoveries |
| Mayer Multiple | Price / 200D MA | ~0.8-0.9 | Value zone in larger corrections |
Cross-Checks from On-Chain: Supply, Miners, and Risk Appetite
Long-Term Holders (LTH) and Supply Dynamics
- Sticky supply: High share of supply last active ≥1y historically supports bottoms by constraining sell pressure.
- LTH-SOPR near 1.0: Suggests long-term holders are not aggressively selling into weakness.
- Distribution rhythm: In early-stage bull markets, LTH distribution to new buyers (including ETF vehicles) is steady, not panicked-consistent with bottom formations rather than top distributions.
Miner stress and post-halving cleanup
After the April 2024 halving cut the block subsidy to 3.125 BTC, miner margins compressed. Two indicators help:
- Puell Multiple: Depressed readings reflect revenue stress; rebounds often coincide with market recovery as inefficient hash exits and difficulty adjusts.
- Hash Ribbon logic: Miner capitulation followed by hash-rate recovery has historically marked attractive accumulation windows.
Reserve Risk and HODLer conviction
Reserve Risk aggregates price relative to HODLer long-term conviction. Low values signal favorable long-term value; while bull markets raise Reserve Risk, pullbacks that reset it improve the bottom thesis.
Market Structure Check: Derivatives, Liquidity, and ETF Flows
- Funding and basis
- Negative/neutral funding rates after a long stretch of positive rates imply leverage has been bled off.
- Lower perpetual OI relative to market cap reduces squeeze risk and often precedes healthier advances.
- Spot vs. perps
- Rising spot share of volume and stronger spot-led bounces are characteristic of durable bottoms.
- ETF flows and stablecoin liquidity
- US spot Bitcoin ETFs launched in 2024 (e.g., IBIT, FBTC, ARKB) have become significant marginal buyers. Persistent net inflows during drawdowns support bottom formation.
- Stablecoin Supply Ratio (SSR) trending lower and net USDT/USDC issuance growth point to dry powder entering the system.
Actionable Checklist: Confirming a Bitcoin Bottom
- STH-MVRV rises back above 1.0 after a sub-1.0 dip.
- Spot reclaims STH Realized Price and holds it on pullbacks.
- Funding normalizes at or below neutral; open interest-to-market-cap ratio declines.
- Puell Multiple lifts from depressed levels; hash rate stabilizes or recovers.
- ETF net inflows resume; SSR and stablecoin issuance improve.
- Distribution from LTHs remains orderly; LTH-SOPR hovers near 1.0.
Risks and Invalidation Signals
- Macro shocks: DXY spikes, liquidity drains, or unexpected rate-path changes can overwhelm on-chain signals.
- Structural sell pressure: Sustained ETF outflows or large-scale miner liquidations.
- Technical breakdown: Rejection below the STH Realized Price after a brief reclaim, or a decisive loss of the 200D MA (Mayer Multiple falling and staying sub-0.9).
- Derivatives overheating: Rapidly rising funding and OI before spot demand returns can create fragile bounces.
Conclusion: Bottoming Likely, Not Guaranteed-Focus on Confirmations
The valuation signal centered on STH-MVRV and realized price supports a “possible bottom” narrative for Bitcoin. This view strengthens when on-chain supply behavior, miner health, and market structure align-especially with neutralized leverage and steady spot/ETF demand. While no single metric is determinative, the confluence described here has historically preceded durable reversals. Traders can lean on the checklist above for timely confirmation, while long-term allocators may see current conditions as favorable to scale entries with disciplined risk management.
