Bitcoin on track to be undervalued as stablecoin reserves drop to pre-2021 bull run levels
- Bitcoin is not undervalued as on-chain profit and loss indicators predict BTC bottom is approaching.
- Unspent transaction output in profit and loss provides clear BTC buy signals when a cross is generated, the indicator is yet to show a cross in this cycle.
- Experts believe Bitcoin price is on track for a massive trend reversal as exchange stablecoin reserves drop to pre-2021 bull run levels.
Bitcoin is on track to hit a cycle bottom and begin its recovery as stablecoin reserves across exchanges arrive at pre-bull run levels. Experts are closely watching Unsoent Transaction Output (UTXOs) in profit and loss for a cross, a buy signal that times when BTC is undervalued.
Bitcoin is not undervalued yet despite stablecoin reserves hit pre-bull run levels
Bitcoin on-chain indicators currently signal that the asset has reached the undervalued area. However, unlike most cycle indicators like Puell Multiple and SOPR, Unspent Transaction Output Profit and Loss (UTXOs) is key in identifying when Bitcoin is undervalued.
A cross in UTXOs profit and loss generates a buy signal for Bitcoin and affirms that BTC is undervalued. While other on-chain data helps understand the overall BTC phase, it is difficult to ascertain the buying time. When UTXOs in the profit and loss indicators were crossed, BTC price hit a floor, three halvings in a row.
Bitcoin UTXOs in profit and loss
Once a cross is generated in the chart above, Bitcoin could nosedive. Another key indicator of upcoming Bitcoin trend reversal is stablecoin reserves on exchanges.
Stablecoin reserves on exchanges hit pre-bull run levels
Stablecoins like USD Tether (USDT) and USDC play a key role in Bitcoin price rallies. Since stablecoins are the point of entry, conversion of fiat to crypto, the flow of USDT and other stablecoins in the ecosystem has an impact on BTC price. Spot exchange stablecoin reserves have dropped to their pre-2021 bull run levels. At the same time, volatility in stablecoin inflows has hit an all-time high.
Stablecoin reserves on spot exchanges
An increase of stablecoin inflow to the exchange is considered rising demand for assets like Bitcoin. Holders of large volumes of stablecoins increase their transfer to exchanges before a trend reversal and rally in BTC. With rising demand and higher volatility in stablecoin inflows, Bitcoin price is preparing for the next bull run.
Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
