AxelAdlerJr2023-06-26

When was the bottom of the current cycle formed?

To analyze the timing of the current cycle's bottom, we use the Net Unrealized Profit/Loss Ratio. This ratio, representing the relationship between unrealized profit and loss for Bitcoin, helps us identify periods when market participants could have potentially sold their assets at a loss - indicating a probable 'bottom' of the cycle. On the chart, I've marked in red the periods when the Net Unrealized P/L turned negative. The term 'unrealized' refers to profits or losses that have yet to be cashed in, meaning the assets haven't been sold. During these marked periods, market participants, on average, would be at a loss if they sold their Bitcoin. In the current cycle, we note that the 'bottom' was established on January 13. This was the final day when the average Net Unrealized P/L Ratio dipped below 1, suggesting that most market participants would have ended up selling Bitcoin at a loss. We've highlighted this day on the chart as a pivotal moment marking the onset of the market recovery. This analysis forms a critical part of understanding market behavior, offering insights into how traders and investors respond to price fluctuations.