Rising Bitcoin Activity Hints at Market Bottom and Potential Reversal

Bitcoin’s On-Chain Activity Signals a Turning Point

Bitcoin’s growing network activity could be an early indicator of a market turnaround following its latest correction. The surge in active addresses suggests a potential capitulation event, which historically precedes a price reversal.

Recent data from Glassnode reveals that Bitcoin’s active addresses spiked to over 912,300 on February 28—marking the highest level in nearly three months. The last time activity was this high was on December 16, 2024, when Bitcoin was trading around $105,000.

Capitulation and Market Reversal

According to crypto analytics firm IntoTheBlock, this increase in active addresses may indicate a “capitulation moment” for the crypto market. The firm highlighted in a February 28 post on X:

"Historically, spikes in on-chain activity have often coincided with market peaks and bottoms—driven by panic sellers exiting and opportunistic buyers stepping in."

While no single metric guarantees a price reversal, IntoTheBlock noted that this surge suggests Bitcoin could be at a pivotal stage.

In financial markets, capitulation occurs when investors sell off their holdings in panic, leading to sharp price drops. This often signals a market bottom before a new uptrend begins.

Bitcoin Must Hold $80,500 to Avoid Further Declines

The key support level for Bitcoin currently stands at $80,500. Holding above this level could help stabilize the market, according to Stella Zlatareva, dispatch editor at digital asset investment platform Nexo.

Zlatareva explained to Cointelegraph:

"Options data indicates that BTC’s ability to reclaim $80,500 will be a key factor in near-term momentum. A breakout above this level could pave the way for further upside, while failure to establish it as support may lead to further downside tests."

However, if Bitcoin’s price drops below $84,000, it may test this critical support once again.

Possible Liquidations and Market Reaction

A decline below $84,000 could trigger over $1 billion in leveraged long liquidations across all major exchanges, according to data from CoinGlass. This event could lead to increased market volatility and further price fluctuations.

Despite the short-term uncertainty, Bitcoin appears to be closer to forming a market bottom rather than reaching a local top. One key metric supporting this outlook is Bitcoin’s market value to realized value (MVRV) Z-score—a technical indicator that helps determine whether an asset is overbought or oversold.

As of March 1, Bitcoin’s MVRV Z-score stood at 2.01, suggesting that Bitcoin is nearing oversold conditions. This metric indicates that Bitcoin is entering the green zone on the chart, which historically aligns with market bottoms.

FAQ

1. What does a spike in Bitcoin’s active addresses mean?

An increase in active addresses often signals heightened market activity, which can be linked to both capitulation events and the start of new price trends.

2. Why is the $80,500 level important for Bitcoin?

The $80,500 support level is seen as a key threshold for market stability. If Bitcoin remains above this level, it could prevent further declines and potentially lead to a price rebound.

3. What happens if Bitcoin drops below $84,000?

A drop below $84,000 could result in over $1 billion in liquidations, causing increased volatility and the possibility of further downward movement.

4. What is the MVRV Z-score, and why does it matter?

The MVRV Z-score helps assess whether Bitcoin is overbought or oversold. A lower score suggests Bitcoin is closer to a market bottom, potentially signaling a price rebound.

Bitcoin’s recent on-chain activity and technical indicators suggest that the market may be approaching a turning point. While short-term volatility remains, the data hints at a possible bottoming phase before the next upward move.