All previous bear market cycles witnessed () falls below the fair value (Realized price). After 79 days in the red, the price  currently suggests a bottom at $20,000 is possible.

Determining a market bottom requires looking at many different data sets. However, when it comes to , there are two frequently used on-chain metrics in the past that serve as solid indicators: fair value and the Market Value to Realized Value (MVRV) ratio.

Fair value calculates the average price of supply BTC valid on the date of the last on-chain transaction. It is an essential metric and is considered the cost basis of the market. The MVRV ratio is the ratio between the market capitalization of supply and the fair value of BTC. This ratio is a solid indicator of whether the current price of BTC is above or below “fair value” and is used to gauge the profitability of the market.

Every time the BTC price in the spot market trades below fair value, the MVRV ratio drops below 1. This shows that investors are holding BTC at a price below its cost and incurring a premium. unrealized loss.

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A consistent MVRV ratio shows that support is forming and, when combined with further analysis of fair value, can signal a market bottom.

All of Bitcoin's previous bear market cycles have seen the price drop below the 200-week moving average fair value. Since 2011, the mean period below fair value has lasted for 180 days, the only exception being March 2020, where the drop lasted only 7 days.

Bitcoin's Actual Price Shows A Bottom May Be Forming
Graph showing Bitcoin's fair value and MVRV rate from 2011 to 2022 | The source: Glassnode

The ongoing bear market began in May with the fall of () has seen BTC price stay below the MVRV rate for 79 days. Despite trying to climb above the MVRV rate in the last week of August, it is still too early to say whether BTC will signal the end of the bear market.

What it does signal is a strong resistance level forming near $20,000, which helps determine market strength and the potential low that BTC could drop in a future bear cycle.

According to data from , BTC saw its relative unrealized losses skyrocket in August, following a similar spike in early summer. Relative Unrealized Loss indicates how much BTC is worth more than the current price is losing. The increased unrealized loss score indicates that the addresses continued to hold and did not sell them despite the loss.

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Bitcoin's Actual Price Shows A Bottom May Be Forming
The chart shows Bitcoin's relative unrealized losses from 2011 to 2022 | The source:

A look at historical data shows that every time the relative unrealized loss spikes, BTC makes a higher low. In each subsequent market cycle, BTC has attempted to retest the highs it reached before the bear market but almost always cannot beat it. It took at least two years before the BTC price reached the highs of the previous market cycle.

Looking at the data, it is likely that BTC is bottoming out. And while this suggests a bullish trend in the coming months, it could still be another two years before the market fully recovers and enters a full-blown bull run.

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