The market is showing key signals, and a rebound may be imminent.
The real turning point in the market often lies in the details where long-term investors, who are usually reluctant to cut losses, are also being forced to sell.
On-chain data indicates that an indicator known as the short-term behavioral weighted trend signal (BWTS) is emitting signals worth paying attention to. The sophistication of this indicator lies in its focus not only on whether investors are selling at a loss but also on measuring whether the chips that have been 'held for a while' are also being forced to cut losses. This behavior is known as 'trend capitulation' and is often a core characteristic of market sentiment hitting the bottom.
Historical data shows that when the trajectory of BWTS (red line) diverges from the BTC price (black line), it indicates that the panic selling in the market is gradually being digested. This divergence is usually a precursor to a reduction in market selling pressure and the brewing of a rebound.
Analysis shows that the current BWTS pattern is similar to certain historical periods. This can be interpreted as the market having the conditions for a rebound, with the key being that as long as this divergence pattern is not broken, one can assume that the potential rebound momentum has not yet been exhausted.
A historical lesson to be wary of is the May 2022 Luna crash. This event broke the existing divergence pattern at that time, leading to a possible rebound being thwarted, and the market subsequently fell into a deeper bear market. This indicates that strong external shocks can interrupt the market's natural clearing process.
For us, the BWTS indicator offers a unique perspective on observing market sentiment. When the most steadfast long-term holders (holding chips) also begin to sell due to short-term pressure, it often represents the last batch of sellers in the market exiting. This usually occurs before the dawn of a new round of increases and signals the exhaustion of bearish forces.
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