Bitcoin (BTC) just recorded its worst month since June 2022, falling 20.48% amid contracting demand and a risk-off market environment. 

Yet three on-chain indicators point to deepening Bitcoin capitulation and early signs of seller exhaustion.

Santiment Says ETF Outflows Near Capitulation Levels

On-chain analytics firm Santiment reported that Bitcoin ETFs have logged $8.475 billion in total net outflows since May 6.

However, the firm argued that fund flows work better as a sentiment gauge than a crash warning. Prices often move in the opposite direction of crowd expectations over time, the firm said.

“The bigger this streak of BTC outflows gets, the more we can reliably identify this stretch as frustration, fear, and retail capitulation rather than a fresh reason to panic,”

Santiment added that heavy redemptions suggest many weak hands have already left. Extended outflows would therefore strengthen the case that Bitcoin is approaching a “prime bottom zone.”

Underwater Supply Points to Investor Stress 

Glassnode data points in the same direction. The firm said roughly 10.83 million BTC now sit at a loss, against 9.22 million in profit. This marks one of the sharpest declines in profitability during the current cycle.

Historically, Glassnode noted, loss-making supply overtaking profitable supply has coincided with financial stress and widespread capitulation among newer participants. Meanwhile, long-term holders have returned to accumulation. 

Still, the firm cautioned that a final volatility spike driven by capitulation cannot be ruled out.

“The data suggests Bitcoin is transitioning from a distribution phase toward one of accumulation, but confirmation is still needed. While the foundations for a longer-term recovery are gradually taking shape, the market may first need to endure one final test of conviction before a sustainable uptrend can emerge,” Glassnode said.

Bitcoin Net Supply Ratio Hits a 2022 Bear Market Low

Analyst Darkfost highlighted a third signal from Bitcoin’s Net UTXO Supply Ratio.

“This ratio has now been negative for a week and just reached -0.075, corresponding to a buy signal. The last time this happened was at the end of 2022, right at the end of the bear market,” he wrote.

He clarified that the signal does not detect a bottom. Still, the analyst noted that a growing number of indicators have hit extreme levels. In his view, this points to Bitcoin “entering a genuine devaluation phase.”

“We now have several signals pointing to seller exhaustion. The next step is a renewal of demand, and that could take some time,” Darkfost added.

Nonetheless, caution remains warranted. BeInCrypto highlighted that Bitcoin’s Coinbase Premium turned negative in mid-January near $95,583. 

By February 24, BTC had crashed 33% to about $64,100. The current negative streak is longer. If the premium stays negative, the January precedent suggests downside risk persists.

Source: BeInCrypto