Bitcoin loss metric reaches rare level linked to past market bottoms

CryptoQuant has reported that Bitcoin’s realized profit and loss ratio has dropped to a 43-month low of -0.35, a level that has historically appeared near major market bottoms.

Summary

• CryptoQuant says Bitcoin’s realized P&L ratio has fallen to a 43-month low, a level previously seen near market bottoms.
• U.S. spot Bitcoin ETFs recorded $221.7 million in inflows, ending a 10-day outflow streak as Bitcoin rebounded.
• Bitwise CIO Matt Hougan says reduced leverage could signal the final stage of Bitcoin’s correction before a potential fall rally.

According to blockchain analytics platform CryptoQuant, Bitcoin’s realized profit and loss ratio has fallen to -0.35 for the first time since December 2022, when the collapse of FTX pushed Bitcoin below $16,000.

The metric measures the net percentage of Bitcoin held at a realized profit or loss relative to the total circulating supply, and CryptoQuant said previous declines below this threshold have coincided with major turning points in the market.

CryptoQuant said the same indicator dropped below -0.35 during the 2015 and 2019 bear markets before Bitcoin later entered sustained recoveries. Based on those historical readings, the firm said the current level has repeatedly identified market bottoms with a high degree of accuracy.

Although the indicator points to heavy realized losses across the network, Bitcoin (BTC) has already started recovering from its latest selloff. The cryptocurrency has gained more than 7% since falling to nearly $58,190 on June 25 after losing about half its value from its October peak of $126,080.

ETF inflows have returned as market sentiment improves

Recent institutional flows have also improved after weeks of sustained selling pressure. As previously reported by crypto.news, U.S. spot Bitcoin exchange-traded funds recorded $221.7 million in net inflows, ending a 10-session withdrawal streak during which investors pulled nearly $2.7 billion from the products.

The return of inflows came after softer U.S. economic data eased concerns about future Federal Reserve rate policy, helping Bitcoin recover above $61,000 before climbing to around $62,500.

Still, June remained the weakest month for U.S. spot Bitcoin ETFs since their launch, with total net outflows reaching about $4.5 billion.

Several market observers have now pointed to historical trading patterns that could support Bitcoin during July.

Crypto analyst Cyclop cited CoinGlass monthly return data showing Bitcoin has posted gains exceeding 20% during July in every previous bear market, while noting the comparison does not guarantee the same outcome this year.

Separately, crypto analyst Ardi said previous Bitcoin bear markets typically spent around one year forming a bottom. Based on the current correction lasting roughly nine months, Ardi estimated Bitcoin may be approaching the period that has historically carried the highest probability of a cycle low, although he cautioned that any bottom could arrive earlier or later than historical averages.

Analysts say leverage has been reduced

Another factor supporting the recovery has come from the recent unwinding of leveraged positions tied to Strategy’s preferred stock offering.

Earlier this week, Bitwise Chief Investment Officer Matt Hougan said fears surrounding Strategy’s Stretch (STRC) preferred stock had forced excess leverage out of the market after the security fell from its $100 par value to below $75, raising concerns about the sustainability of its dividend model.

Commenting on the recent price action, Hougan said the deleveraging likely moved Bitcoin closer to a market bottom. He also cautioned that identifying the exact bottom is impossible while events are unfolding, but said current conditions suggest the correction could be entering its final phase.

Looking beyond the current downturn, Hougan said he expects the next Bitcoin bull market to begin in the fall. He added that the next rally is likely to rely less on retail traders and more on institutional participants, including banks, pension funds, sovereign wealth funds, asset managers, financial advisers, and endowments.