Bitcoin bottom is in

Renato Shirakashi
Jan 9, 2019 · 6 min read

An honest review of best indicators

I have so much respect for Murad Mahmudov, David Puell, Willy Woo,
Tone Vays but I have to respectfully disagree with them. I have a really strong case in hands that state: The Bitcoin bottom is in.

My case is not based on feelings. Just numbers.

The realized value

First of all, let's review an amazing work done by Nic Carter, inspired by Pierre Rochard, creating the concept of "Realized Value".

Basically, it is the approximation of the average price of BTC when it was last moved/bought. It's calculated going through the blockchain state, mapping all UTXO in a given day, and multiplying their value by the price of BTC on the time the block they are was created. When you plot that vs price, you have something like this:

Realized Value (red) vs Price (blue)

So what's so special about it? Basically, by it, we can approximate the average price paid by people that have BTC now. As of now (9th/Jan/2019), the average realized value is $4.5k and the current price is around 4k.

If you take a closer look in the graph, you can notice that prices really tend to reject being below realized price. That's because, at that price, people would have to sell in a loss, and people are less likely to eat losses. In addition, there's a general narrative that the BTC price is going to the moon, so less likely even more. Therefore, there's less supply available. Prices are pushed up.

That's why, from 6k, BTC had a long space to go down. The average buyer was still on profit if they had to sell. There was enough supply. Demand was going down. So prices went down. But now, there is significantly less supply. Demand is still low, but now supply is also very low. As time goes by, prices getting stable, people will start to be more confident, and demand will grow.

But from this, how can I call that the bottom is in?

Well, let's check the numbers and graphs


The MVRV (Market-Value-to-Realized-Value) is an indicator created by Murad Mahmudov and David Puell . It's simply the ratio BTC Price/BTC Realized Value. So:

When MVRV > 1, current prices are greater than realized value: people are having profits on average if they sell

When MVRV <1, current prices are lower than realized value: people are having losses on average if they sell

The MVRV graph looks like this

So you can all see that prices got unstable when MVRV was below 1 and above 3. But this is not enough to call a bottom. One could argue that MVRV has room to go even lower now, because In Jan 2015 it was lower than now. But first, we need to think where this indicator is converging to.

If we consider that in the future bitcoin will be a lot more stable, less volatile, as it's slowly happening, the MVRV will converge to 1, with lower highs and higher lows over time. That's because there will be very little difference from the price you will buy and the price you will sell your coins. If we consider this reasonable, let's now draw lines on high and below lows to see where MVRV is actually heading to:

And there it is! It is actually heading to 1!

It seems very unlikely that the MVRV could go lower than the current low. There should be a very strong seller pressure, bringing new sellers to the game. But it's very difficult to convince someone to sell in such big loss (-31%) on average, if this person hasn't already. Only a big distortion would move MVRV below 0.69.

The NVT Ratio

Lot's of people that argue that we will see a further low point to the NVT Ratio as an indicator of current market weakness. I just don't see it.

First, let's review the NVT Ratio: it's simply the bitcoin token supply divided by the daily BTC value transmitted through the blockchain. So it would be more of a fundamentalist indicator to tell the usage "value" of the network. Let's plot it here, compared to price action:

Price (blue) vs Realized Value(red) vs inverted NVT Ratio (green)

For visual purposes, I just inverted the graph. What you're seeing in the green line is the 50 day median of TxBTCVolume/CirculatingSupply . As you can see, per points 1,2,3,4, we are following the same patterns as 2014/2015. In special, from point 1–3 we have a decrease in network activity, and then from 3–4 a sudden increase, pre and post the final capitulation. Then, we can expect a slight decrease in activity again, as the markets calm down and realize that it was the bottom. I don't think there's nothing wrong with current NVT ratio value. And I can argue that it also indicates we had a bottom already.

What about the "there was not enough pain yet"

Many people argue that the capitulation is really in when we feel that there's is too much pain. I tend to agree with the phrase, but, sorry, but this is too subjective. How can we measure it? What are the markers, statistical analysis to back these perceptions? How can we be certain which is the current feeling of the players?

As far as I'm concerned, I cannot rely on this. And even if there's not a lot of pain, but people that would sell simply don't have the coins to sell, there's no way for the market to go down. And I insist to say that when the realized price is above the current price, is way harder for people to sell. No one wants to eat a loss.


There are plenty of other indicators that show that bitcoin reached or is very close to reaching its bottom. I really like the logarithmic regression deviation.

But you can consider even simpler things like the weekly 200MA:

However, I don't like considering them alone, because they are only really functions of the previous prices.


The fact that I'm arguing that Bitcoin has reached its bottom doesn't mean I think that it's going straight up. In fact, I believe that we will be in a 3k~5k range for relatively long time, as demand starts to build up again (or some big event happens meanwhile). There will be a series of little tests the market will make to confirm this is a safe place.

However, a major consequence of this being the bottom is that this contradicts the vision that the cycles are getting longer and longer. That would be the end of this 1-year cycle, exactly as the 1-year cycle in 2014. This leads to an indication that we could see a new ATH in 3 years.

Any questions, ping me on twitter:

Further analysis on these and other onchain indicators are in my patreon:

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