Short-Term Bearish Momentum
Between January 7th and 9th, Bitcoin (BTC) experienced an 11% decline, breaking below the $92,000 level for the first time in nine days. This drop led to the liquidation of over $257.5 million in leveraged long positions over the same period and coincided with profit-taking, strong economic data, and uncertainty surrounding US President-elect Donald Trump’s upcoming inauguration.
Three Data Metrics Indicate a Local Bottom
Despite this short-term bearish momentum, three data metrics indicate that the drop to $92,000 may have marked the local bottom for BTC, providing a good entry point for investors.
SOPR Drop Hints at Bitcoin Price Bottom
On-chain data reveals that Bitcoin’s spent output profit ratio (SOPR) dropped to 0.98 on January 10th, suggesting that short-term holders (STH) — investors who have held Bitcoin for less than 155 days — are selling at a loss.
SOPR measures the profit or loss of spent Bitcoin outputs by comparing the value of coins when they were last moved to their value when they are spent again. The short-term SOPR focuses on coins moved in less than six months and can be used to indicate market sentiment. A value of less than 1 might suggest capitulation or a market bottom, potentially signaling a good time to buy.
This scenario has often preceded price recoveries, indicating a potential buying opportunity. When SOPR fell to 0.90 following Bitcoin’s drop to $49,577 on August 5th, it was followed by a 31% recovery in price to $65,103 three weeks later. More recently, BTC’s 62% rally to all-time highs above $108,000 between November 5th and December 17th, 2024, was preceded by a drop in the SOPR ratio below 1 on November 4th.
Some investors saw the drop to $92,000 as an opportunity to buy, interpreting the price action as a shakeout of weak hands rather than a new bear cycle. "Adding some BTC spot here at $92.8k—frustrating price action, but have to buy these major support areas," said Bitcoin investor Sean Buckley.
BTC Entity-Adjusted Dormancy Flow Flashes Green
Another metric that can be used to determine whether the Bitcoin market has bottomed out is the entity-adjusted dormancy flow, which represents the ratio of BTC’s current market capitalization and the annualized dormancy value (measured in US dollars).
Historically, a drop in the indicator below 250,000 (red circles) presents a "good historical buy zone" and has often preceded significant price recoveries or marked the end of price corrections.
The indicator dropped from 260,278 on December 16th to reach a low of 210,000 on January 9th. Historically, breakouts above 250,000 after a previous dip have coincided with the beginning of significant bull runs. One instance is when Bitcoin bottomed out in July 2021 and began a new bull run, with the metric falling into the green zone. Bitcoin went on to hit a record high of $69,000 on November 10th.
Bitcoin Long-Term Supply Distribution Has Peaked
Additionally, the percentage of Bitcoin supply held by long-term holders (LTHs) reached the lowest since December 6th, 2024. This means that distribution by LTHs has occurred over the last month, perhaps driven by profit-taking following Bitcoin’s run to all-time highs above $108,000.
Now, the distribution rate by LTHs has slowed down, with the 30-day percent change in LTH supply suggesting that the distribution rate has likely peaked, reaching extremes seen in previous cycles, according to Glassnode.
The reduced rate of LTH supply distribution suggests that the market might be transitioning from a distribution phase to accumulation, which historically aligns with market bottoms. Explaining this phenomenon in a January 10th X post, Glassnode said: "In past cycles, price continued to climb even after LTH distribution peaked. This infers that a peak in distribution doesn’t always align with an immediate macro top."
Conclusion
While every investment and trading move involves risk, these three data metrics indicate that the drop to $92,000 may have marked the local bottom for BTC. As such, this could be a good time to buy, but readers should conduct their own research when making a decision.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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