Bitcoin supply ratio posts first ‘buy’ since Nov 2022

CryptoQuant’s Advanced Net UTXO Supply Ratio printed a ‘buy’ reading on several sessions in late June and early July, the first such trigger since November 2022, according to a blog post by CryptoQuant contributor Axel Adler Jr. The reading marks a change in the indicator’s recent trend but does not by itself confirm a market bottom.

The metric measures the share of Bitcoin supply that last moved at a profit or at a loss. Adler wrote that the ratio dropped deeply into negative territory and then crossed back above the model’s signal threshold, producing the buy readings.

Adler cautioned that UTXO supply cues tend to appear near cyclical lows but are not definitive on their own. “Confirmation would be the ratio holding above zero together with rising price. The negative scenario is a move back into negative territory without price support,” he wrote.

A related measure, the proportion of supply currently held at a loss smoothed by its 90-day simple moving average, remains lower than in prior bear markets. Adler projected that the 90-day SMA of supply in loss should reach the model’s bear-market reversal target within about two months and recommended treating capitulation as a process rather than a completed event. “Until then, it is more accurate to treat capitulation as a process rather than a completed fact,” he wrote.

Another CryptoQuant contributor writing as Darkfrost noted the UTXO ratio can trigger during sharp price drops or sharp price rises and described several indicators that point to seller exhaustion. “This won’t stop BTC from going lower, but we now have several signals pointing to seller exhaustion. The next step is a renewal of demand, and that could take some time,” Darkfrost wrote.

Market participants warned that a buy reading on the supply ratio is an early sign and not a guarantee of a sustained trend change. If the ratio falls back into negative readings without concurrent price strength, prices could decline further. Some participants expect a final bear-market low could arrive later in the third quarter or beyond if demand does not materialize.

The Advanced Net UTXO Supply Ratio uses on-chain classifications of coins by their last movement and whether those movements were in profit or loss. Traders monitor these measures to assess whether long-term holders are capitulating, short-term holders are selling, or accumulation is returning. A sustained shift in these measures together with rising prices is commonly cited as evidence consistent with a market bottom.