CryptoQuant reported that Bitcoin’s realized P/E ratio fell to a 43-month low of -0.35, a level that has historically appeared near major market bottoms.
summary
- CryptoQuant says Bitcoin’s realized P/E ratio has fallen to a 43-month low, a level previously seen near market bottoms.
- US-based Bitcoin ETFs recorded inflows of $221.7 million, ending a 10-day streak of outflows as Bitcoin rebounded.
- Matt Hogan, CTO at Bitwise, says the decline in leverage could signal the final stage of Bitcoin’s correction before a potential rally in decline.
According to blockchain analytics platform CryptoQuant, Bitcoin’s P/E ratio fell to -0.35 for the first time since December 2022, when the FTX crash pushed Bitcoin below $16,000.
The metric measures the net percentage of Bitcoin held in realized profit or loss compared to the total supply in circulation, and CryptoQuant He said Previous declines below this limit have coincided with major turning points in the market.
The same index fell below -0.35 during the bear markets of 2015 and 2019 before Bitcoin subsequently entered a sustained recovery, CryptoQuant said. Based on those historical readings, the company said the current level repeatedly identified market bottoms with a high degree of accuracy.
Although the indicator indicates huge losses achieved across the network, Bitcoin (Bitcoin) is already starting to recover from the recent sell-off. The cryptocurrency has gained more than 7% since falling to nearly $58,190 on June 25 after losing about half its value from its October peak of $126,080.
ETF flows returned as market sentiment improved
Recent institutional flows have also improved after weeks of sustained selling pressure. Ditto I mentioned By crypto.news US Bitcoin exchange-traded funds recorded $221.7 million in net inflows, ending a 10-session withdrawal streak during which investors withdrew nearly $2.7 billion from the products.
The return of flows came after weak US economic data eased concerns about the Federal Reserve’s future interest rate policy, helping Bitcoin recover above $61,000 before rising to around $62,500.
However, June remained the weakest month for US spot bitcoin ETFs since their launch, with net outflows totaling around $4.5 billion.
Many market watchers have now pointed to historical trading patterns that could support Bitcoin through July.
Cryptocurrency analyst Cyclops cited CoinGlass monthly return data showing that Bitcoin has posted gains exceeding 20% during July in every previous bear market, noting that the comparison does not guarantee the same outcome this year.
Separately, cryptocurrency analyst Ardi said previous Bitcoin bear markets typically spent about one year forming a bottom. Based on the current correction lasting approximately nine months, Ardi estimated that Bitcoin may be approaching the period that has historically carried the highest probability of a down cycle, though he cautioned that any bottom could hit earlier or later than historical averages.
Analysts say leverage has been reduced
Another factor supporting the recovery came from the recent unwinding of leveraged positions tied to Strategy’s preferred equity offerings.
Earlier this week, Matt Hogan, chief investment officer at Bitwise, said He said Concerns surrounding Strategy’s Stretch preferred stock (STRC) have forced excess leverage out of the market after the value of the security fell from its $100 face value to below $75, raising concerns about the sustainability of its dividend model.
Commenting on the recent price action, Hogan said deleveraging would likely push Bitcoin closer to the market bottom. He also warned that determining the exact bottom is impossible as events unfold, but said that current conditions indicate that the correction may be entering its final phase.
Looking beyond the current downturn, Hogan said he expects the next Bitcoin bull market to begin in the fall. He added that the next rally is likely to depend less on retail traders and more on institutional participants, including banks, pension funds, sovereign wealth funds, asset managers, financial advisors and endowments.
