Bitcoin UTXO Signal Points to Bear Market Bottom

Analysis of Bitcoin unspent transaction outputs (UTXOs) shows that investors are capitulating, a pattern that has historically coincided with bear market bottoms. 

The ratio of the number of UTXOs spent in profit versus at a loss has fallen to its lowest level this bear market cycle, said CryptoQuant analyst known as Darkfost on Saturday. 

This is the first time this signal has triggered since the start of the correction, “demonstrating that the number of UTXOs spent at a loss is reaching significant levels, reflecting the start of a broader capitulation,” he said. 

The metric shows that markets are entering a bottoming phase, which could be a strategic time to accumulate. The last time it fell this low was in the depths of the previous bear market in mid-2023, when BTC prices fell to around $26,000. 

“These periods have always been profitable for long-term investors,” continued Darkfost. “They correspond to the moment when the majority gives up and loses interest.”

He cautioned that it is a process that takes time, and we are on a long timeframe. 

Bitcoin UTXO profit loss ratio at bear market low. Source: CryptoQuant

“The bottom signal I’ve been waiting for just fired,” said analyst DurdenBTC on Saturday, also commenting on the UTXO ratio. “It’s caught every cycle low since 2016, and it will still feel terrible for weeks,” he added. “If buying here were comfortable, the signal wouldn’t exist.”

Related: Bitcoin faces fresh capitulation risk as 50K BTC moved at a loss

In a separate post, Darkfost confirmed the findings, stating that long-term holders are starting to “enter a capitulation phase,” observing that the Spent Output Profit Ratio (SOPR) is increasingly moving into negative territory for this cohort. 

However, he also said that this correction has been largely fueled by the rapid increase in BTC inflows to exchanges coming from short-term holders.

Meanwhile, onchain analytics firm Swissblock said on Saturday that Bitcoin has likely moved beyond the initial breakdown, but “we’re still in the base formation phase.”

“Price is stabilizing, yet momentum remains deeply negative, and Bitcoin impulse has only just returned to neutral.”

Selling pressure may increase 

Uncertainty and selling pressure may increase following resumed strikes by the US military on Iranian targets over the weekend. 

US fighter jets conducted strikes on 10 Iranian military targets at multiple locations in and near the Strait of Hormuz late on Saturday in response to an Iranian drone attack on a commercial ship, reported Central Command. 

BTC prices dipped to $59,800 in early trading on Sunday morning, but had recovered the $60,100 level at the time of writing. 

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