Bitcoin supply gauge flashes first buy signal since 2022

Bitcoin has triggered a rare on-chain signal that analysts associate with late-stage bear markets, giving crypto investors another data point to watch as BTC remains under pressure. The signal does not confirm a bottom, according to CryptoQuant contributors, because demand has not yet returned strongly enough to support a sustained rebound.

Axel Adler Jr., a crypto analyst and contributor to on-chain analytics platform CryptoQuant, said in a Friday blog post that Bitcoin’s Advanced Net UTXO Supply Ratio produced buy readings in late June and early July. The metric tracks how much of Bitcoin’s supply last moved at a profit versus at a loss.

A UTXO, or unspent transaction output, is a record of Bitcoin that has been received but not yet spent. Analysts use UTXO-based data to estimate whether coins are sitting in profit or loss based on the price when they last moved.

What the signal is showing

According to Adler, the Advanced Net UTXO Supply Ratio moved into negative territory and then recovered above its signal threshold. He said that sequence caused the model to print its first buy signal since November 2022, the period associated with the prior Bitcoin bear-cycle low.

The comparison matters because on-chain measures can help investors see whether selling pressure is becoming exhausted. In plain English, if more holders have already taken losses or stopped selling, the market may be closer to finding a floor. That still leaves a major caveat: a signal tied to supply does not create new buyers by itself.

Adler said UTXO Supply Ratio signals tend to appear near cyclical lows, but he cautioned that they do not prove a macro bottom has already arrived. He said confirmation would require the ratio to stay above zero while Bitcoin’s price rises. If the ratio slips back into negative territory without price support, that would be the weaker scenario, according to his analysis.

Supply in loss has not reached prior extremes

Adler also pointed to another part of the setup: the amount of Bitcoin supply currently held at a loss. He said that measure remains below the levels reached in earlier bear markets, which means the capitulation phase may still be underway.

Capitulation is market shorthand for a stretch when discouraged holders sell after sustained price declines. Adler wrote that Bitcoin’s 90-day simple moving average of supply in loss could reach its bear-market reversal target within two months. A simple moving average is a rolling average that smooths out daily changes to make the trend easier to read.

That timing suggests analysts are treating the bottoming process as unfinished rather than settled. Cointelegraph reported that BTC price expectations have leaned toward a bear-market low forming in the third quarter or later.

Demand remains the missing piece

Darkfost, another CryptoQuant contributor, also discussed the UTXO-based signal in a Wednesday Quicktake post. He said the metric can react during sharp moves in either direction because it depends on whether UTXOs are in profit or loss.

Darkfost said the current reading fits with the idea that the bear market may be nearing an inflection point, but he also warned that the signal would not prevent Bitcoin from falling further. In his view, several indicators now point to seller exhaustion, while the next step would be a return of demand, which may take time.

Bitcoin was listed at $62,628.76 in the market data accompanying the report, up 2.14%. For everyday investors, the takeaway is narrow but useful: one supply metric has shifted into a zone seen near past cycle lows, while CryptoQuant analysts say price confirmation and fresh demand are still needed before calling the bear market over.

This story draws on original reporting from Cointelegraph.