UTXO Profit/Loss Ratio Falls into Historical Bottom Range
In a recent analysis, CryptoQuant analyst MorenoDV_ highlighted that Bitcoin's UTXO Block Profit/Loss Ratio has dropped into the range commonly observed during past market bottoms. This metric measures the ratio of profitable UTXOs to loss-making UTXOs within each block. When the ratio falls to extremely low levels, it typically signals deep internal market cleansing, as most short-term holders sell at a loss amid price declines, pushing market sentiment to extreme fear.
Bottom Confirmation Still Requires Long-Term Moving Average Decline
Despite the low reading, MorenoDV_ emphasized that a confirmed bottom has not yet been reached. He pointed out that the 365-day moving average (365-day MA) needs to show a more significant decline to prove that the market's long-term profitability structure has been fully reset, rather than simply reflecting a short-term oversold condition. Relying solely on single-day or short-term data to identify a bottom risks mistaking a dead-cat bounce for a trend reversal. Historical patterns indicate that a true bottom is more likely only after the long-term moving average has also declined substantially.
Distinguishing Short Squeeze Rallies from Structural Recovery
The analyst cautioned that the current environment could give rise to short squeeze rallies at any time. Such rallies can be sharp but are often short-lived. If the profit/loss ratio fails to recover consistently during the rally (i.e., the proportion of profitable UTXOs does not steadily rise), it should not be interpreted as a structural recovery signal. Investors must differentiate between a 'dead-cat bounce' and a 'trend reversal.' The former may last only hours or days, while the latter requires multi-dimensional confirmation from fundamentals, liquidity, and on-chain metrics.
Historical Patterns Suggest Further Pressure Needed
Overall, while initial signs of BTC internal cleansing have emerged, historical evidence suggests the market may need to endure more pressure before fully exiting the current bear market. MorenoDV_‘s analysis aligns with patterns from previous cycles: before a true bottom is confirmed, multiple retests and prolonged sideways consolidation are often required, during which the profit/loss ratio oscillates repeatedly. On-chain data provides important reference points, but investors should also consider macroeconomic conditions, policy factors, and capital flow trends for a comprehensive assessment.