CryptoQuant: Bitcoin trades near cycle bottom as digital gold narrative resurges

Bitcoin has issued two noteworthy market signals this week, with on-chain metrics indicating a possible formation of a macro bottom while price activity increasingly mirrors gold’s traditional safe-haven characteristics.

Macro bottom signals from on-chain data

Blockchain analytics provider CryptoQuant released two reports suggesting that Bitcoin may be moving into the early stages of a cyclical low. The cryptocurrency recently traded at $63,362 and slipped about 2% over the past week. Since registering an all-time high of $126,080 in October, Bitcoin has dropped nearly 50%.

Analyst MorenoDV from CryptoQuant noted that at each major cycle bottom, long-term holders have experienced deeper unrealized losses than the broader market. This group is typically known for strong conviction and a lower sensitivity to volatility, yet carries heavier unrealized losses during these periods.

At each major cycle bottom, long-term holders were sitting on deeper unrealized losses than the broader market, meaning the cohort normally associated with the strongest conviction and lowest sensitivity to volatility is carrying greater unrealized stress than the market as a whole.

This observed trend is measured through the adjusted Net Unrealized Profit/Loss (NUPL) data for long-term holders, a cohort considered particularly resilient in volatile markets.

Currently, long-term holder aNUPL has turned negative and is now below the all-market average, indicating these investors face heavier losses than the wider market. Historically, this pattern has appeared at every major Bitcoin cycle bottom.

With Bitcoin trading about 50% below its cycle high, the setup aligns with conditions typically seen ahead of cyclical lows and signals more than just a routine correction.

Despite these signals, CryptoQuant advised against calling a bottom too early. In prior cycles, aNUPL for long-term holders reached even deeper negative levels, sometimes described as “depression territory,” before a true low was established. Current data suggests that level has not yet been reached.

The firm outlined that Bitcoin could still experience another drawdown, possibly pushing long-term holder losses to previous extremes. On the other hand, robust institutional interest and a more resilient investor landscape could help the market stabilize with less severe damage than in past cycles.

Mini dictionary: NUPL (Net Unrealized Profit/Loss) is an on-chain metric that evaluates the difference between unrealized profit and loss among holders. A negative NUPL means more holders are at a loss; a positive NUPL indicates the opposite.

Bitcoin’s ‘digital gold’ narrative resurfaces

CryptoQuant CEO Ki Young Ju highlighted that Bitcoin’s 90-day correlation with gold has shifted from nearly -0.9 earlier this year to around +0.7, levels last seen during periods when the “digital gold” narrative was particularly prominent. This change points to renewed investor sentiment viewing Bitcoin as a scarce and non-sovereign asset, similar to gold’s role as a hedge against inflation, currency debasement, and geopolitical risks.

Bitcoin’s correlation with gold has returned to digital-gold-era levels, with investors again treating it as a scarce, non-sovereign store of value.

The narrative of Bitcoin as “digital gold” has gained traction in the market for years, with investors often positioning it as a long-term store of value akin to precious metals. At times, market behavior has reflected this association, especially as correlations rise.

Despite this, Bitcoin’s movements still show mixed patterns. Recently, it has traded in tandem with the Nasdaq index, displaying the volatility and risk appetite of technology equities, while at other intervals, it moves with gold as investors seek scarce assets during market stress.

It is important to note, however, that Bitcoin’s volatility remains much higher than gold’s, and a positive gold correlation does not guarantee upward price pressure. Indeed, both assets may decrease or increase in value together, depending on broader market forces.