A key Bitcoin onchain metric has fallen to its lowest reading of the current bear market cycle, with analysts pointing to the signal as a potential indicator that a broader capitulation phase is underway and a market bottom may be forming.
UTXO Ratio Drops to Cycle Low
The ratio of Bitcoin unspent transaction outputs (UTXOs) spent in profit versus those spent at a loss has collapsed to its weakest level this cycle, according to CryptoQuant analyst Darkfost, who flagged the development on Saturday. This marks the first time the signal has fired since the current correction began.
Darkfost described the reading as “demonstrating that the number of UTXOs spent at a loss is reaching significant levels, reflecting the start of a broader capitulation.” He cautioned, however, that capitulation is a process that takes time to fully play out.
The last comparable reading occurred in mid-2023, at the depths of the prior bear market, when Bitcoin prices had fallen to approximately $26,000. At the time of writing, BTC was trading near $60,100 after dipping to $59,800 in early Sunday trading.
“These periods have always been profitable for long-term investors. They correspond to the moment when the majority gives up and loses interest.” — Darkfost, CryptoQuant
Second Analyst Confirms the Signal
Independent analyst DurdenBTC separately highlighted the same UTXO ratio on Saturday, stating: “The bottom signal I’ve been waiting for just fired. It’s caught every cycle low since 2016, and it will still feel terrible for weeks. If buying here were comfortable, the signal wouldn’t exist.”
Long-Term Holders Entering Capitulation
In a follow-up post, Darkfost added that long-term Bitcoin holders are beginning to “enter a capitulation phase,” with the Spent Output Profit Ratio (SOPR) for this cohort increasingly moving into negative territory. He also noted that the current correction has been largely driven by a rapid surge in BTC inflows to exchanges from short-term holders.
Base Formation, Not Recovery Yet
Onchain analytics firm Swissblock weighed in on Saturday, saying Bitcoin has likely moved beyond the initial breakdown phase but warned that conditions remain challenging:
“Price is stabilizing, yet momentum remains deeply negative, and Bitcoin impulse has only just returned to neutral.”
Swissblock described the current state as a “base formation phase,” stopping short of calling a confirmed bottom.
Geopolitical Risk Adds Selling Pressure
Market uncertainty received a fresh jolt over the weekend following US military strikes on ten Iranian military targets at multiple sites in and near the Strait of Hormuz. The strikes were conducted in response to an Iranian drone attack on a commercial vessel, according to US Central Command. Analysts flagged the escalation as a potential driver of additional selling pressure in risk assets including Bitcoin.
