Bitcoin Bottom Signal Fires But This Time Investor Risk Appetite Is Absent

A Bitcoin (BTC) bottom signal that appeared in 2023, ahead of a 130% rally in 2024, has flashed again this week, raising the possibility that the price is nearing another bullish inflection point. 

At the same time, the broader data of liquidity, exchange-traded fund (ETF) flows, and macroeconomic data changes the environment from two years ago, suggesting that the path forward may not mirror the previous cycle’s.

BTC bottom trigger appears without strong follow-through

Data aggregator Swissblock noted that Bitcoin has now logged 25 consecutive days in its “extreme high risk” zone, the longest stretch on record and above the 23-day peak seen in 2023. Historically, an extended stay in this zone has aligned with late-stage drawdowns or a bottom signal.

MN Capital founder Michaël van de Poppe also pointed to the BTC versus supply in the profit/loss chart, which shows the price interacting with levels that previously marked bottoming phases. In 2023, the shift from high risk to low risk coincided with the start of a powerful bullish expansion.

Trader positioning is not in sync with an uptrend. RugaResearch noted that 30-day apparent demand continues to flip between positive and negative. While the selling pressure has faded, sustained buying demand has not maintained its dominance.

Related: Bitcoin to $30K? Analysts debate when and at what price BTC will bottom

Deeper Bitcoin drawdowns take time

Macroeconomic newsletter Ecoinometrics highlighted that a BTC decline of this magnitude rarely resolves quickly. Excluding the 2020 COVID rally, which was supported by aggressive monetary policy intervention, the recoveries from 50% drawdowns developed over an extended period.

The ETF flow data reinforces the cautious tone. Since August, cumulative inflows into gold ETFs have surpassed spot Bitcoin ETF flows on a 90-day rolling basis. Over the same period, Bitcoin funds have posted negative flows on a 90-day average rolling basis, currently sitting at –$2.06 billion. 

The inflation trends added further context. Ecoinometrics noted that the headline Personal Consumption Expenditures (PCE) sits near 2.9% year-on-year, with core near 3.0% and core services above 3.4%. The Federal Reserve targets PCE, and the recent trend has not shown a clear downward shift. Without easing expectations, the liquidity expansion looks limited.

The price levels frame the debate. CMCC Crest Managing Partner Willy Woo said that any short-term relief rally to $70,000 to $80,000 is likely to be met with another round of selling pressure, since “the broader regime is heavily bearish with both spot and futures liquidity deteriorating”.

Woo said that the $45,000 level aligns with the prior bear market. Below that, $30,000 and $16,000 mark the historical support, which is tied to longer-term trend preservation. 

Related: Crypto taxes updated, BTC stuck below $70K: Month in charts