Six on-chain metrics suggesting Bitcoin is a ‘generational buying opportunity’

Several on-chain metrics of the Bitcoin (BTC) network are giving off flashing buy signals following this year’s rally.

Bitcoin has emerged from its slumber to register a 37% gain since the start of 2023. However, on-chain data still signals that this could be a “generational buying opportunity”, according to analysts.

On January 24, researcher and technical analyst “Game of Trades” identified six on-chain metrics for its 71,000 Twitter followers.

The first metric is an accumulation trend score highlighting areas of high accumulation in terms of entity size and number of coins purchased.

“Large entities have been in deep accumulation mode since the FTX collapse,” the analyst noted, adding that “a similar accumulation occurred in the lows of 2018 and 2020.”

The Bitcoin entity-adjusted dormancy flow is a measure of the ratio of the current market capitalization and the annualized dormancy value.

Whenever the dormant value exceeds the market cap, the market can be considered in full capitulation, which has been a good historical buying zone.

According to Glassnode, this metric fell to its lowest level on record in 2022.

Dormancy flow adjusted to BTC entity. Image: Glassnode

Bitcoin reserve risk can be used to measure long-term holder confidence in the price of BTC. This figure also fell to its lowest level on record at the end of 2022, according to data from Glassnode.

The realized price (RP) of Bitcoin is the value of all coins in circulation at the price they last moved – in other words, an estimate of what the whole market paid for their coins .

According to Woo Charts, Bitcoin has been trading below this level since FTX collapsed in November until January 13. It is currently sitting just above the RP, which represents another buying opportunity.

The Bitcoin MVRV Z-score shows when BTC is significantly overvalued or undervalued relative to its “fair value” or realized price. When the metric leaves the extremely undervalued zone, it is often seen as the end of the bear market.

BTC MVRV Z-score. Image: Glassnode

Finally, there is the Puell Multiple which examines the fundamentals of mining profitability and its impact on market cycles.

Lower readings, as they currently stand, indicate stress among miners and represent long-term buying opportunities.

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The analyst concluded that these six on-chain metrics “point to an outstanding risk-reward setup in Bitcoin.”

The metrics are all at levels similar to market cycle lows in 2015, 2018 and 2020, they added.

At press time, BTC was trading up over 1.9% in the past 24 hours at $22,675, according to data from Cointelegraph.