The recent upward trend in the cryptocurrency markets and Bitcoin’s rise above its 200-day moving average have once again raised the question among investors: “Has the bottom been left behind?”
Mike, an analyst at the crypto analytics firm The DeFi Report (TDR), warned in his latest video analysis that a cautious approach should be taken to the current bull run, examining the market structure and on-chain data metrics.
Despite Bitcoin recently rising 10% from its lows and challenging resistance levels, TDR analyst Mike estimates a 65% chance of seeing a lower low (below $58,000) in the market. He suggests the current rally may be a reaction rather than a permanent reversal, basing this prediction on his on-chain “coin rotation” analysis.
According to data shared by The DeFi Report, for past bear markets to end, investors who bought at peak prices need to largely exit the market (capitulate) by selling at significant losses.
- Peak Buyers ($108k – $126k Group): Only 51% of investors who bought Bitcoin at the very top of this cycle have sold their assets so far.
- Second Peak Group ($92k – $108k Group): Coin rotation in this group is currently only at 17%.
- At the bottom of the 2022 bear market, at least 50% of investors who bought at the peak levels had given up. Current data suggests the market needs a little more time to complete a process of weariness and loss of confidence over time.
According to the analysis, there is no strong institutional or retail demand yet in the market. Mike notes that spot trading volumes are at their lowest levels in the cycle, and that net inflows into spot Bitcoin ETFs have also been near zero (flat) for about two months. A significant increase in on-chain trading volumes and a change of hands for coins is needed to confirm the formation of a bottom.
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The analyst also mentioned that MicroStrategy founder Michael Saylor sold $216 million worth of Bitcoin, and sharply criticized this move:
“We know Michael Saylor doesn’t want to sell Bitcoin, but he was forced to take this step to fund the company’s financial structure (dividend payments on fixed-income instruments). This is a capital management problem for MicroStrategy (MSTR) shareholders; it does not directly create a permanent systemic risk or margin call for the Bitcoin market.”
According to Polymarket data, the probability of the Clarity Act, the cryptocurrency regulation bill expected to pass the US Congress, becoming law this year has dropped from over 75% to below 50% (approximately 40%). TDR notes that the process could be reset if the House of Representatives passes to the Democrats in a potential midterm election, and that a lack of progress before a congressional recession in August could be a short-term negative catalyst for the market.
Based on historical price losses ranging from 68% to 75%, he stated that it would not be surprising if the price also fell to the $40,000 mark.
*This is not investment advice.
