On-Chain Analysis Reveals Bitcoin Bulls Must Remain Above $71,000 or Risk Crashing Hard to $55,500 ⋆ ZyCrypto

On-chain analysts warn that Bitcoin’s structure is fragile despite its short-term strength, with a critical support level now defining the market’s next major move.

According to on-chain analysis shared this week, Bitcoin must hold above $71,000 to avoid a deeper breakdown. A sustained loss of this level could trigger a capitulation phase similar to the 2022 downturn, with the next major support zone projected near $55,500.

Alphractal’s João Wedson notes that disbelief in such downside scenarios mirrors sentiment at previous cycle lows, when market participants consistently underestimated how far prices could fall.

These concerns emerge even as Bitcoin posted a 4.04% gain over the past 24 hours, outperforming its recent weekly trends and aligning with a broader crypto market rise of 2.85%.

The bounce reflects competing forces, including expanding institutional infrastructure from firms like Fidelity and BlackRock, alongside heightened geopolitical risks that are reshaping global risk appetite. However, whether Bitcoin can strengthen its haven narrative under rising tensions or continue to cede that role to gold remains an open question.

Meanwhile, on-chain indicators support the cautious outlook. Data tracking Bitcoin’s Supply in Loss percentage has begun trending upward again, a pattern that historically marks the early stages of bear markets.

In prior cycles in 2014, 2018, and 2022, this metric shifted higher well before prices found a definitive bottom, as losses gradually spread from short-term holders to longer-term participants.

While the current reading is well below historical capitulation levels, the directional change suggests the market may be transitioning into a bear market structure rather than a routine pullback within a broader uptrend.

Analysts emphasize that on-chain metrics often signal stress before it becomes visible in price action. Another closely watched indicator is Net Unrealized Profit and Loss. A move into negative territory could signal capitulation and the formation of a durable bottom, while a positive reading may extend the current consolidation phase.

For now, Bitcoin is at a crossroads, balancing short-term relief rallies against mounting evidence of structural vulnerability.