Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin (BTC) price has shown modest gains, trading around $113,900 on Tuesday, following a local low of $108,650. This rebound is supported by three key on-chain and technical indicators suggesting that the recent correction may have found its bottom. Analysts are now pointing to historical buy zones and chart patterns that could signal an impending upward trend for the cryptocurrency.
On-Chain Metrics Signal Potential Bottom
One indicator pointing to a potential market bottom is the entity-adjusted dormancy flow, which measures the ratio of Bitcoin’s market capitalization to its annualized dormancy value. Historically, a drop in this indicator below 250,000 has often preceded significant price recoveries or marked the end of corrections, acting as a “good historical buy zone.”
The indicator recently fell to a low of 133,300 on Thursday, a level last seen before Bitcoin’s July 2021 rally that led to an all-time high of $69,000 in November of that year. A return to these historical buying zones suggests that the current price levels could represent a similar opportunity.
Furthermore, Bitcoin’s short-term holder Net Unrealized Profit/Loss (NUPL) has turned negative, indicating stress among recent buyers who have held BTC for less than 155 days. On-chain data provider Glassnode noted in an X post on Monday that “STH capitulation events have historically marked periods of market reset, often laying groundwork for renewed accumulation.”
Crypto influencer Jack echoed this sentiment on Tuesday, stating that “History says this capitulation zone often marks local bottoms.” This phenomenon typically signals widespread exhaustion among sellers, paving the way for demand from long-term holders or new buyers to stabilize prices and drive them upward. A similar negative NUPL reading was observed near the April local bottom below $75,000, which preceded a 65% rally to a $124,500 record high.
Technical Patterns Suggest Upward Movement
Bitcoin’s price action since September 18 has formed a V-shaped pattern on the 12-hour chart, following an initial 7.8% drop to $108,700 last Thursday. Buyers accumulated during this dip, leading to a sharp reversal towards current levels. The relative strength index (RSI) has also risen from an oversold zone at 27 to 53, indicating increasing upward momentum.
As the V-shaped pattern completes, the price could advance towards its neckline, which sits around the $118,000 resistance zone, representing a potential 4% increase from current levels. A broader view on the daily chart reveals a double-bottom formation, which projects a return to the all-time highs at $124,500 once the $118,000 resistance is decisively broken. Such a move would equate to a 10% gain from the current price.
Crypto analyst Matthew Hyland commented on this market structure, describing it as “just clean,” noting the double bottom in the daily timeframe and a potential breakout from an inverse head-and-shoulders pattern. A Cointelegraph report also suggested that BTC price could rally towards the $140,000 range if resistance between $112,000 and $114,000 is breached.
Outlook
With key on-chain metrics entering historical buy zones and technical chart patterns suggesting a reversal, the sentiment among analysts points to the $108,650 level as a significant local bottom for Bitcoin. The confluence of these indicators suggests a potential for continued upward momentum in the near term, with targets ranging from $118,000 to $124,500 and potentially higher.
