On-Chain Metrics Signal Bitcoin May Be Approaching a Cycle Bottom

Sharpe Ratio and Capitulation Indicator: What the Data Shows

CryptoQuant analyst Ignacio Moreno de Vicente has flagged two critical on-chain metrics that historically coincided with the formation of long-term bitcoin price floors. According to his analysis, the Sharpe Ratio has plunged deep into negative territory, reaching -40.

«Bitcoin's Stress Cycle Is Ending — But Not Yet Reversing. Risk remains present… But for investors with a cycle-aware framework, the data suggests we are closer to the beginning of an opportunity than the end of one» — CryptoQuant.com (@cryptoquant_com), original post

Breaches of the -40 threshold on the Sharpe Ratio in 2015, 2019, 2020, and 2023 each preceded subsequent rallies. The second metric — a buy/sell pressure indicator — adds further context. Moreno de Vicente explained that durable cycle lows form in stages rather than all at once.

First, the market flushes into a zone of maximum sell pressure — forced sellers and panic-driven participants capitulate. Then, as available supply contracts, conditions gradually normalize. The most favorable risk-reward ratio emerges when the indicator returns to the «buy pressure» range, signaling genuine demand recovery rather than mere stabilization.

The analyst noted that the «orange flush» (capitulation) phase has already occurred and the market is transitioning into the next stage. The delta is slowly recovering but has not yet reached «blue levels.» This gap — between confirmed capitulation and demand revival — has historically been the optimal window for asymmetric capital deployment. Moreno de Vicente cautioned, however, that macroeconomic risks, liquidity conditions, and fragile investor sentiment could prolong the transition.

Why This Matters

The convergence of signals across multiple on-chain indicators strengthens the case that a cycle bottom may be forming. For market participants, this suggests a potential phase shift from prolonged decline to accumulation. However, confirmation of a full reversal depends on specific conditions that remain unmet, making timing uncertain.

Glassnode: Bitcoin in a Typical Bear Phase

Glassnode analysts confirmed that bitcoin is operating within a characteristic bear market phase.

«Bouncing in a Bear. Bitcoin bounced from $67k to $72k, but weak spot demand and softer futures activity suggest the recovery still lacks strong conviction, even as ETF flows begin to turn modestly positive» — glassnode (@glassnode), original post

A «relief rally» driven by a temporary US-Iran truce could push the price toward $78,000 — the level of the true market mean price. Yet no meaningful shift in momentum has been observed so far. Two conditions are necessary for a sustained recovery:

• Stabilization of short-term holder cost basis (currently still declining);
• A sharp reduction in losses among those who bought at cycle peaks.

The seven-day moving average of realized losses by long-term investors has exceeded 4,000 BTC per day since November 2025 — a capitulation signal from buyers who entered at highs. The most reliable confirmation of a phase change would be a sustained decline of this metric below 1,000 BTC per day combined with price reclaiming the short-term holder cost basis of $81,600.

At the time of writing, bitcoin was trading near $71,400, down 0.3% over the past 24 hours but up 7.5% over the week.

Saylor: The Cycle Bottom Is Already In

Strategy founder Michael Saylor takes a more bullish stance, arguing that bitcoin has already bottomed around $60,000, according to The Block. He pointed to a familiar pattern: downtrends end not when sentiment improves, but when forced selling is exhausted.

Saylor attributed the latest decline primarily to overleveraged miners and weaker participants liquidating their positions. As their supply dries up, the balance of power shifts. He identified several factors limiting further downside:

• More stable demand for bitcoin ETFs;
• Improving liquidity expectations;
• Growing corporate treasury allocations.

He characterized current conditions as asymmetric: supply from weak hands is being depleted while bitcoin demand continues to grow.

Addressing quantum computing concerns, Saylor stated that these risks are distant and manageable. Any real threat would develop gradually, giving the network ample time to adapt. Bitcoin's open architecture will allow developers to implement quantum-resistant upgrades well before such attacks become practically viable. On April 8, Lightning Labs CTO Olaoluwa Osuntokun unveiled a prototype tool designed to protect wallets from potential quantum attacks.