Bitcoin May Be Down, But The Fundamentals Are Mostly Bullish

Bitcoin BTC/USD saw its value fall by half over a couple of months, but on-chain analytics do not paint a grim picture despite the downward price action.

Bitcoin Price Action: In early October 2021, Bitcoin's price reached its all-time high of over $68,600 and soon thereafter started a fall that took its price down to under $33,500.

While this is admittedly a significant bearish price movement — although not as relevant as non-crypto traders might expect it to be — on-chain fundamentals continue to paint an undecisive but still mostly bullish picture.

Bitcoin Fundamentals: Glassnode's Bitcoin Reserve Risk chart shows the coin's reserve risk stands at 0.00233 — right in the middle of the bullish green zone. This goes to show that long-term Bitcoin holders feel confident about the coin's price, supposedly offering an attractive risk-reward profile to invest right now.

While the MVRV Z-Score chart is not in the green zone, it is significantly closer to it than the red zone, with the current value being just under one. The red zone starts at 2.5 and the green zone is any negative number.

This metric shows the ratio between the difference of market cap and realized cap, and the standard deviation of market cap. Historically, when it reached the red zone, Bitcoin was near the cycle's top, and when it reached the green zone, it was near the bottom.

The Puell multiple chart also shows a value that is much closer to the green zone (starting at 0.5 and under) than the red zone (four and higher) with a value of just under 0.7. This metric is calculated by dividing Bitcoin's daily issuance USD value by the 365-day moving average of daily issuance value.

Lastly, Bitcoin's price is only about 0.34 of what the stock-to-flow model estimates it to be worth right now.

As Benzinga explained in a dedicated article, Bitcoin stock-to-flow is a mathematical model that attempts to estimate the coin's value based on market data that has historically been relatively accurate but started struggling significantly more than usual last year.

The Final Word: All of this data seemingly suggests that while this may very well not yet be the bottom for Bitcoin's price during this fall, we should expect it to resume its upward movement once more after making new lows.