Bitcoin may have weathered the worst of the shock, but the data suggests this is stability, not an escape from speed.
Is Bitcoin Resetting?
According to the Cryptoquant websiteCurrent conditions suggest that a reset is underway, as Bitcoin works through a broad phase of deleveraging. However, even with the easing of market pressures, the top cryptocurrency has not yet been able to form a definite bottom in this down cycle.
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Analyst MorenoDV_ believes that Bitcoin’s on-chain/derivatives “stress cycle” indicators are rolling in, indicating that the market is emerging from an acute stress phase, but has not yet entered a clean bullish reversal system. The alignment between Bitcoin’s short-term Sharpe ratio and the 30-day buy/sell pressure delta indicates one of the strongest risk/reward profiles in the current cycle, but still requires patience, the analyst says.
A stress cycle is a phase characterized by high unrealized losses, forced deleveraging, compressed futures basis, and defensive positioning.
The analyst starts by looking at the Sharpe ratio. The current value has fallen well into negative territory, reaching around -40, a level that has historically indicated major buying areas. In previous cycles (2015, 2019, 2020, and 2023), each time the ratio fell below this line, Bitcoin subsequently experienced a strong repricing rally.
Bitcoin Sharpe Ratio (Short Term). Source: CryptoQuant.
The analysis says: We are now sitting in the same area surrounded by red circles and shown in the drawings.
Explanation of delta pressure
According to the analyst, the buy/sell pressure delta helps explain where we are in the bottoming process. Bottoms don’t happen all at once: they unfold in stages.
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First, there is a large wave of selling (orange/red highs below -0.05) when panicked sellers and investors are forced to dump their coins. After that, the selling pressure slowly subsides and returns to the green zone as fewer people want to sell. The best entries usually occur when the delta finally moves into the blue “buying pressure” zone, which means real buying demand is returning, not just a slowdown in selling.
Bitcoin: Buy/Sell Pressure Delta (30). Source: CryptoQuant.
The report says that the sell-off phase is likely over and that we have entered the intermediate phase. Delta is recovering but has not yet reached the strong buy zone. Historically, this gap has been where some of the best opportunities have emerged.
This analysis is consistent with the QCP market color from yesterday. Their report claimed that the Bitcoin movement appears to be more of a temporary pause than a permanent solution
The analyst warns that there is still a risk. The overall backdrop, liquidity and weak sentiment may take that away. But for investors who think in cycles, the data suggests we are closer to the beginning of a new opportunity than the end.
Yesterday, Bitcoin bounced back and reclaimed $72k. At the moment of writing, BTC trades for the low $71ks on the daily chart. Source: BTCUSD on Tradingview.
Cover image by Perplexity. BTCUSD chart from Tradingview.
