Bitcoin's Bear Market Risks Spotlighted by On-Chain Data

Bitcoin's recent price movements have pushed an important on-chain profitability metric into a concerning situation that mirrors indicators observed in 2022, which led to a prolonged market downturn. One analyst warns that if Bitcoin drops below $70,000, it could trigger a year-long bear market.

Key Takeaways

Bitcoin's "Supply in Profit" metric is at a pivotal point, indicating potential risks of a bear market.
A drop below $70,000 could see supply in profit fall to around 10 million BTC, increasing bearish pressure.
Holding between $75,000–$80,000 could preserve bullish momentum, aiding a recovery.
Current trading price of Bitcoin is around $88,102.

Bitcoin Supply in Profit chart with three moving averages

Bitcoin price news

In a morning brief dated December 30, analyst Axel Adler Jr. highlighted that Bitcoin's "Supply in Profit" metric is currently at a critical juncture. Following a stabilization within the $87,000–$90,000 range after the October highs, the amount of BTC held above acquisition price has sharply declined from over 19 million BTC to approximately 13.2 million BTC. This trend has created a significant disparity between short- and medium-term moving averages.

Bitcoin's 2022-Like Setup Appears

The key aspect of Adler's analysis lies in the gap between the 30-day and 90-day simple moving averages of the Supply in Profit. After the fall from its all-time high, the 30-day average has significantly dropped in value compared to the 90-day average, forming a gap of approximately 1.75 million BTC.

Adler observes that "a similar situation occurred in 2022 before a long bearish period." However, he emphasizes a crucial difference this time: the 365-day moving average remains "historically high," suggesting that the long-term profit situation has not completely degraded.

The immediate question is whether the 30-day trend has reached its low point. Adler noted December 18 as a possible low for the 30-day average, which appears to be recovering. A necessary condition for this recovery is that the Supply in Profit stays above the 30-day average, meaning Bitcoin needs to maintain its current level or rise.

Adler's optimistic forecast is notably precise; he believes the gap between the 30-day and 90-day averages is decreasing by about 28,000 BTC daily mainly due to the 90-day average declining as the previous high values from October fade.

SMA crossover forecast

Adler explains, “Why does the 90-day average decline while the price stays stable?” He points to the mechanics of moving averages: as early October values exit the 90-day calculation—when the Supply in Profit was at peaks of 18–20 million BTC with prices between $115,000 and $125,000—this causes the average to decrease.

This downward pressure is expected to continue into late January, giving a "tailwind" that could help the 30-day line recover to cross above the 90-day line, even without a significant increase in Supply in Profit. Adler forecasts that this bullish crossover could occur between late February and early March.

Key Risk Level: $70,000

However, this prediction relies heavily on price stability. Adler points out that Supply in Profit has a "price elasticity" of 1.3x, so a 10% decline in BTC price could lead to a roughly 13% decrease in the supply that remains profitable. He identifies the $70,000 region as a critical threshold.

Adler writes, “What price would invalidate the bullish crossover?” He indicates that falling below $70,000 would drop Supply to around 10 million BTC, leading the 30-day average to decline more rapidly than the 90-day average. The narrowing gap would cease and potentially expand, thus delaying any bullish indicators indefinitely.

In this scenario, Adler suggests conditions would resemble those in 2022: entrenching a wider spread instead of a tighter one, pushing recovery prospects to possibly take “up to a year.” Conversely, he proposes that holding above $75,000–$80,000 throughout January would sustain the Supply in Profit and promote convergence.

As of the latest data, Bitcoin is trading at $88,102.

Bitcoin price chart