Is Bitcoin truly at a pivotal moment, or are we witnessing another temporary rebound? After flirting with the critical $80,000 mark, the cryptocurrency has made a move back toward $88,000, igniting discussions about its potential low point. Insights from on-chain analysis company Santiment provide a thought-provoking perspective on this situation.

Is This the Lowest Point for Bitcoin?

Santiment starts off by pointing out inconsistencies in how market terms are used. “Labels like ‘bull market’, ‘bear market’, ‘peak’, or ‘trough’ can be manipulated to fit any narrative, causing confusion among traders and investors,” they highlight. Many analysts fail to outline a proper timeframe when categorizing market states, which leads to confirmation bias following established trends.

The bounce from below the $80,000 threshold has prompted optimism among some analysts, who suggest that selling pressure may be easing. While Santiment acknowledges the allure of discussions around a market bottom, they underscore the importance of considering more than just price metrics.

Looking at market sentiment, the data suggest a contrarian viewpoint. Santiment notes that traders’ optimism about Bitcoin’s investment potential diminishes quickly when monthly gains become uncertain. Their social metrics reveal a rise in bearish outlooks and statements declaring the presence of a bear market.

“The increase in claims about a bear market and heightened bearish sentiment usually indicates significant market shifts,” the firm states, emphasizing that pivotal reversals often happen when retail investors lose faith. The lingering question remains: “Are the retail investors’ dreams of major gains truly extinguished?”

Bearish Sentiments Remain Strong

Analysis of derivatives markets adds further context. Current aggregated funding rates indicate significant short positions, but they have not reached the extremes typical after recent historical highs. “An accumulation of short positions often pauses downward momentum,” Santiment points out, recalling that similar trends in the past led to temporary price recoveries. For the time being, however, there is not an overwhelming number of bets against Bitcoin’s price.

Profitability metrics are also telling a similar narrative. Both short-term and long-term MVRV (Market Value to Realized Value) remain negative, indicating that many holders are sitting on unrealized losses. This ratio indicates that as MVRV increases, more participants may feel compelled to sell. The current depressed levels suggest that a recovery above $90,000 could occur, though it is not guaranteed.

Concerningly, signals from network fundamentals and holder dynamics indicate a decline in Bitcoin’s overall utility. Santiment reports that weekly new addresses have decreased from a peak of over 3.37 million in December 2023 to approximately 2.21 million. Additionally, the number of weekly active addresses has fallen from over 963,900 to around 729,200. This decline suggests a weakening in user engagement, which would typically accompany a healthy market bottom.

Moreover, a noticeable shift from whales to retail investors raises eyebrows. Santiment describes this trend as “a significant concern that should induce caution regarding claims of a market bottom.” Accounts holding between 10 and 10,000 BTC are shrinking their holdings, while wallets with less than 0.1 BTC grow in number.

In blunt terms, the imbalance in holder types is not conducive to a solid bottom formation. Since the onset of the COVID-19 pandemic, institutional investors have largely driven market rallies, and the whale cohort contributed significantly to the peak seen on October 6. However, by October 8, these larger wallet holders began to reduce their positions steadily, while smaller investors appear to seize opportunities to buy at lower prices.

The outlook is divided depending on the timeframe considered. “Overall, current data aligns more with the idea of a short-term market bounce,” driven by a negative MVRV and vocal fears among retail investors. However, significant challenges remain for Bitcoin to reach six-figure valuations, as whale investors seem to be inclined to sell rather than accumulate.

Santiment concludes with a cautious outlook: “The long-term trajectory is likely downward as utility diminishes along with whale participation.” They remind readers that surprises can arise in the vibrant world of cryptocurrencies, especially as the year draws to a close.

As of the latest reports, Bitcoin is trading at approximately $86,884.