Bitcoin (BTC) may be in the process of bottoming out after a 25% gain based on several market signals.

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The price of BTC is up about 25% after dropping to about $17,500 on June 18th. The upward pullback came after a 75% correction from the November 2021 high of $69,000.

Daily BTC/USD price chart. Source: Trading View
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However, the recovery seems modest and comes with bearish risks of continuation due to prevailing macroeconomic headwinds (rate hikes, inflation, etc.) and the collapse of many well-known crypto firms such as Three Arrows Capital, Terra, and others.

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But some widely watched indicators paint a different scenario, suggesting that the prospects for Bitcoin to decline from current price levels are minimal.

This big “oversold” bounce

The first sign of Bitcoin’s macroeconomic bottom is its weekly Relative Strength Index (RSI).

Notably, BTC’s weekly RSI became “oversold” after dropping below 30 in the week of June 13th. This is the first time the RSI has slipped into oversold territory since December 2018. Interestingly, Bitcoin ended its bearish rally in the same month. and rose over 340% over the next six months to $14,000.

In another instance, Bitcoin’s weekly RSI fell to 30 (if not lower) in the week that began on March 9th. 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 BTC/USD price chart showing the relationship between RSI and the market bottom. Source: Trading View

The price of bitcoin has also recovered since June 18, opening the door for a potential repeat of its parabolic rally history following the “oversold” RSI signal.

Bitcoin NUPL jumps above zero

Another sign of a potential macroeconomic bottom for Bitcoin is the Net Unrealized Profit and Loss (NUPL) indicator.

NUPL is the difference between market capitalization and realized capitalization divided by market capitalization. It is presented as a coefficient, where a value above zero means that investors are in profit. The higher the number, the more investors are in profit.

Bitcoin must close above $21.9k to avoid another BTC price crash – trader

On July 21, NUPL bitcoin surged above zero as the price hovered around $22,000. Historically, such a reversal has been accompanied by a significant increase in the price of BTC. The diagram below illustrates the same.

BTC/USD compared to NUPL performance since 2009. Source: CryptoQuant.

Mining Profitability

The third sign that Bitcoin is forming a macro day comes from another network indicator called the Puell Multiple.

Puell Multiple explores mining profitability and its impact on market prices. The indicator does this by measuring the ratio of the daily supply of coins (in USD) and the 365 moving average of the daily supply of coins (in USD).

Bitcoin Puell Multiple. Source: glassnode

The strong performance of Puell Multiple shows that mining profitability is high compared to the annual average, suggesting that miners will liquidate their bitcoin treasury to maximize revenue. As a result, a higher Puell multiplier is known to coincide with the macro maximum.

Conversely, a lower Puell Multiple means that miners’ current profitability is below the annual average.

Thus, rigs with break-even or below-zero bitcoin mining revenue are at risk of shutting down, losing market share to more competitive miners. Pushing weaker miners out of the Bitcoin network has historically reduced selling pressure.

Interestingly, the value of the Puelle Multiple as of July 25 is in the green box and is similar to the levels seen during the March 2020 price crash and the 2018 and 2015 price lows.

The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Cryptooshala.com. Every investment and trading step involves risk, you should do your own research when making a decision.