The profit and loss lines are reappearing, and the bottom of the Bitcoin cycle signals

According to Woofun AI, the on-chain trading pattern is heralding the end of Bitcoin's downward cycle, and signs of trend reversal are beginning to appear. Anonymous analyst Crypto Dan pointed out that the share of profit and loss in the Bitcoin supply is crossing in a critical way. This recurring on-chain characteristic has marked the end of the bear market and the beginning of a new upward cycle many times in history. Current market data shows that this structural change may mean that the game pattern between long-term holders and short-term traders is being reshaped, providing an important reference basis for judging the bottom of the market.

Judging from the indicator mechanism, Bitcoin's on-chain data defines the status of each coin by tracking the purchase price of each coin: when the market price is higher than the purchase price, it is considered a “profit state,” and vice versa, it is a “loss state.” Analysts use the ratio of profit to loss supply to quantify market sentiment and the stage of the cycle. In the latter half of the downturn cycle, recent buyers generally fell into losses, while long-term holders remained profitable. The gap between the two narrowed until the ratio converged and crossed.

According to data compiled by Woofun AI, this intersectional phenomenon occurred at the bottom of the 2015 and 2019 cycles, and then the market all switched from a bear market to a bull market. Crypto Dan believes that if the current trend continues to be confirmed, it will mean that Bitcoin's four-year cycle pattern closely related to the halving event is repeated. Although he did not assert that the reversal has been decided, he clearly stated that “signs of the arrival of a cryptocurrency bull market have appeared.”

However, the laws of history are not absolute truth, and the current market context has profoundly changed. With the massive participation of institutional investors and the introduction of ETFs, the market structure is different from what it used to be. Macroeconomic factors and regulatory policies have become new key variables, and these external shocks may break the rules of history.

It is worth noting that the profit/loss intersection is a lagging indicator, and false signals have also appeared in history. In the event of a macroeconomic recession or a sudden change in regulatory policies, the market may not be able to reverse as scheduled, even if there are cross-signals. Therefore, the effectiveness of a single indicator has been questioned. Investors need to be aware of the complexity of the current market situation and cannot simply apply past experience.

For different participants, this signal has differential implications. Long-term holders may see opportunities to raise funds after stopping the loss wave, while short-term traders face a higher risk of volatility. Investors should go beyond simple price speculation and comprehensively consider various on-chain indicators, market fundamentals, and the global economic situation when making decisions.

Despite this encouraging signal, the high volatile nature of the cryptocurrency market remains the same, and price trends still need to be confirmed through a wider range of market indicators. Prudence and thorough research are still the best strategies for dealing with uncertainty, and blindly following the trend can cause huge losses.