Bitcoin’s Potential Bottom: Analyzing Technical and On-Chain Indicators
Bitcoin (BTC) has experienced a significant decline of over 35% from its record high of around $126,200, established two months ago. However, a combination of technical and on-chain indicators suggests that the cryptocurrency may be establishing a local bottom. In this article, we will delve into the key takeaways and signs that point to a potential recovery in the Bitcoin market.
Momentum, miner capitulation, and liquidity indicators are all pointing to fading selling pressure. The weekly Stochastic RSI has turned up from oversold levels, a setup that has historically appeared near key inflexion points, before the price rebounded. This signal is reinforced by the emergence of bullish crosses in early 2019, March 2020, and late 2022, which preceded significant price recoveries.
Bitcoin Sellers Nearing Exhaustion
As of December, Bitcoin’s weekly Stochastic RSI had turned up from oversold levels, a setup that has historically appeared near key inflexion points, before the price rebounded, as highlighted by trader Jesse in the chart below.
BTC/USD weekly chart. Source: TradingView/Jelle
Similar bullish crosses emerged in early 2019 (after BTC bottomed near $3,200), March 2020 (the COVID crash low near $3,800), and late 2022 (around the $15,500 cycle low). In each case, momentum shifted first, while price lagged. Adding to the signal, Bitcoin’s three-day chart is printing a bullish divergence where price made a lower low, but momentum did not.
BTC/USD three-day chart. Source: TradingView/Jelle
Bitcoin Miner Capitulation Shows BTC Bottom is In
Bitcoin’s hashrate fell 4% in the month to Dec. 15, a development VanEck analysts Matt Sigel and Patrick Bush viewed as “a bullish contrarian signal” linked to miner capitulation. Periods of sustained hash rate compression have historically preceded stronger Bitcoin returns, they said, explaining that since 2014, BTC posted positive 90-day returns 65% of the time following 30-day hashrate declines.
Bitcoin mean hash rate vs. price. Source: Glassnode
The signal strengthened over longer horizons, with positive 180-day returns 77% of the time and an average gain of 72%. Rising prices could also improve miner profitability and bring sidelined capacity back online.
Bitcoin May Rally in 4-6 Weeks, One Macro Indicator Shows
Bitcoin may be nearing a bottom as liquidity conditions begin to improve, a factor that has historically led to major BTC reversals. Analyst Miad Kasravi’s backtest of 105 indicators showed the National Financial Conditions Index’s (NFCI) top often leads a Bitcoin rally by four to six weeks.
Chicago Fed National Financial Conditions Index. Source: FRED
This signal appeared in late 2022 and mid-2024, both ahead of sharp rallies. Historically, each 0.10-point decline has aligned with roughly 15%–20% upside in Bitcoin, with deeper NFCI readings marking prolonged BTC uptrend phases.
NFCI Index vs. Bitcoin price. Source: X
As of December, NFCI sat at -0.52 and was trending lower.
NFCI Index vs. Bitcoin price. Source: X
A potential catalyst is the Federal Reserve’s plan to rotate mortgage-backed securities into Treasury bills, a move Kasravi compared to the 2019 “not-QE” liquidity injection that preceded a 40% Bitcoin rally. Despite these signals, many market watchers anticipate Bitcoin’s price to decline further, with their price targets ranging from $70,000 to $25,000.
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