3 signs on the chain to watch

More and more indicators on the chain point to a significant cyclical change in the cryptocurrency and Bitcoin (BTC) market. In the past, selected indicators that have shown the beginning of a long-term bull market are starting to turn green.

BeInCrypto offers 3 on-chain signals recently presented by prominent analysts. These include the value map on the chain, guaranteed capitalization and long/short holders limit.

Although each indicator tracks a different movement of the Bitcoin blockchain, their long-term structure shows cyclical change. In the past, these changes have been associated with the start of a bull market in cryptocurrencies. Ironically, they often occur during historical halving events.

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3 Symbols on the Chain: Value Map

The Bitcoin on-chain value map indicator was created by the famous analyst @therationalroot. It combines 3 other, more basic on-chain indicators: guaranteed capitalization, liquid supply, and coin days destroyed.

By combining these three indicators, the analyst was able to generate a long-term range that seems useful for identifying the lows and highs of the BTC price. This region takes the form of a 4-color band with a green median. It refers to the so-called “fair value” of Bitcoin. If the BTC price is near this line, the great cryptocurrency is neither overvalued nor undervalued.

Conversely, when the price of BTC departs meaningfully from “fair value”, Bitcoin is either overvalued or undervalued. The two bands above green – yellow and red – are reached during bull markets, when BTC is overvalued. On the contrary, the two bands below – light and dark blue – are associated with bear markets and low BTC prices.

In a post on X (Twitter), the analyst emphasized that Bitcoin has returned to the green “fair value” area. In the past he mentioned that achieving this level is associated with a period of sideways trending. This occurred during the halving and represents a phase of harvesting prior to a mature bull market. However, after a moment, he added:

“Note, fair value is increasing.”

Looking back at the past moments on the charts, when the “fair price” starts to rise (green circles), we can see that this is definitely a bullish sign. Indeed, after this event, there was a sideways trend for several months, which naturally shifted to a higher level. What's more, they appeared a few weeks before the halving.

The only exception to this was the Covid-19 outbreak in early 2020. This event culminated in a small bear market, which turned out to be a good buying opportunity before the previous bull market.

Guaranteed market capitalization will also shift upwards.

The second indicator that exhibits similar behavior to the on-chain value map is the proven market capitalization of Bitcoin. As this indicator is one of the three components of the previously mentioned index, this similarity is not surprising. However, it should be noted that the long-term chart indicates the key period of the cycle reversal.

Realized market capitalization values ​​the various units of the offering at different prices (rather than using the current day's close). Specifically, each UTXO is calculated by weighting its value when it is last moved. Therefore, this indicator is more accurate than BTC bare market capitalization.

We see similarities in the realized capitalization chart going back to the first Bitcoin cycle. All 4 bear markets to date have resulted in modest declines in real capitalization and multi-year sideways trends. Only the start of a new bull market is always associated with a reversal on the indicator chart, which starts up (green circles).

Moreover, multi-year sideways trends look similar to broad, rounded bottoms (blue arrows).

Currently, realized capitalization is trending upward again. This indicates a long-term trend reversal and is a sign of an impending bull market. This indicator – like the value map on the chain – historically changes direction around BTC halving.

Signs on the chain: Longtime owners are starting to sell

Finally, the last on-chain token we've chosen for today's analysis was published on the official X account of data provider Glassnode. This is called the long/short holders threshold.

The indicator graph shows two curves corresponding to resources held by long-term (blue) and short-term (red) bonds. The historical connection between the two charts is obvious. Mature bull markets are characterized by sharp declines on the blue line and increases on the red line. In other words, long-term holders sell their assets to short-term market participants when the price of BTC is rapidly increasing.

However, once the price of Bitcoin is high, the situation changes rapidly. Then, short-term holders panic and sell to long-term investors.

Glassnode analysts point out that the current long/short holder limit situation is unique. The blue line has reached the recent high (ATH), while the red line has reached the all-time low (ATL).

This indicates that we are seeing a cyclical trend reversal on the chart. If short-term holders begin to accumulate Bitcoin, this may confirm an approaching bull market.

However, if this change ever occurs, the change in the long-term chart seems to be only a matter of time. Investors with diamond hands are usually patient and do not sell at a loss.

Click here for BeInCrypto's latest crypto market analysis.