Bitcoin Enters "Deep Value" Territory as On-Chain Analyst Signals Potential Bottom Formation

The recent downturn in Bitcoin's price has triggered intense scrutiny from market analysts examining whether a sustainable price floor is taking shape. James "Checkmate" Check, a leading on-chain researcher, suggests that the risk-reward dynamics have fundamentally shifted following the latest selloff, with Bitcoin potentially entering what he describes as "deep value" territory.

Multiple Indicators Point to Accumulation Zone

Check, who previously served as lead researcher at Glassnode and currently authors Check On Chain, shared his analysis during an appearance on the What Bitcoin Did podcast with host Danny Knowles. According to Check, Bitcoin entered deep value territory across multiple mean-reversion frameworks when prices dropped to recent levels, with capitulation-style losses spiking to magnitudes last observed during the 2022 cycle lows.

The researcher emphasized that the probability of a meaningful market bottom forming now stands at approximately 60%, representing a significant increase from previous assessments. However, he cautioned that this doesn't guarantee an immediate recovery, noting that further price declines remain possible as market sentiment continues to evolve.

Statistical Setup Becomes Increasingly Asymmetric

Check stated that assuming Bitcoin isn't heading toward zero, the statistical setup appears increasingly asymmetric following the selloff. He characterized the current environment as a critical moment for market participants to maintain focus rather than becoming disengaged from price action.

Rather than attempting to identify a specific forced seller driving the decline, Check said his analysis centers on overall market structure. He assigned minimal probability to Bitcoin achieving a new all-time high within the current year without either a major macroeconomic catalyst or significant market event.

ETF Flows Reflect Positioning Adjustments, Not Structural Failure

Addressing exchange-traded fund dynamics, Check acknowledged billions in outflows during the drawdown but framed these movements as positioning unwinds rather than fundamental structural problems. He noted that at an earlier market peak, approximately 62% of cumulative ETF inflows were underwater, yet assets under management declined only in the mid-single-digit percentage range.

Check suggested that earlier outflows correlated with CME open interest patterns, consistent with basis-trade adjustments rather than panic selling among institutional investors.

Four-Year Cycle Theory Dismissed as "Unnecessary Bias"

The analyst offered sharp criticism of the popular four-year halving cycle framework, calling it an "unnecessary bias" for market timing. Check stated that his methodology prioritizes observing actual investor behavior over calendar-based predictions, arguing that relying on predetermined cycles can obscure real-time market dynamics.

Bitcoin chart 1 year, source Coingecko

Bottoms Form Through Process, Not Single Event

Even if the recent low proves significant, Check expects the market to revisit that price level. He explained that bottoms typically form through multiple "capitulation wicks" followed by extended periods of diminished activity, during which sustained uncertainty gradually erodes confidence among late-cycle buyers.

Check described the current environment as late-stage rather than early-stage positioning, while acknowledging that additional downside remains possible. He referenced two failed attempts at new all-time highs in October, followed by a sharp decline that likely generated substantial losses for market participants.

Key Technical Levels and Sentiment Shifts

The analyst identified what he termed a "hodler's wall" of invested capital positioned above critical support levels, including a threshold he called the "bull's last stand." According to Check, once price broke below these levels, downside probability increased materially.

A particularly important reference point cited was the True Market Mean, described as a long-term center-of-gravity price that also aligned with the ETF cost basis. Check argued that once this level broke, the psychological regime shifted to an acceptance phase where market participants began seriously considering the possibility of an extended bear market.

He suggested the market was subsequently drawn toward a prior high-volume consolidation zone where a substantial portion of this cycle's trading activity had occurred. While leverage liquidations likely contributed to the selloff, Check framed these as secondary to a broader sentiment shift where participants began selling rallies during perceived downtrends.

Historical Loss Metrics Signal Potential Turning Point

The most compelling bottoming signal highlighted by Check was the magnitude of realized losses during the recent decline. He noted that capitulation losses occurred at extremely elevated daily rates, comparable to the 2022 bottom, with sellers concentrated among recent buyers from the late cycle and those who purchased during earlier consolidation periods.

Additionally, Check pointed out that SOPR (Spent Output Profit Ratio) printed around minus one standard deviation—a reading that has historically appeared in only two contexts: as an early warning signal or near bottoming phases. This technical indicator suggests significant losses being realized by market participants, often a characteristic of market bottoms.

Check concluded by reiterating that market bottoms form through an extended process involving multiple capitulation events and prolonged periods of reduced speculative interest, rather than materializing at a single definitive price point.

Coinasity's Take

Check's analysis presents a compelling case for Bitcoin establishing a meaningful bottom, backed by multiple technical and behavioral indicators that align with historical bottoming patterns. The 60% probability assessment reflects appropriate caution—recognizing improving risk-reward dynamics without claiming certainty. His dismissal of rigid cycle-based timing in favor of on-chain behavioral analysis represents a more sophisticated approach to market assessment. While the path forward remains uncertain, the convergence of deep value signals, extreme capitulation losses, and SOPR readings at historically significant levels suggests current price zones may offer attractive long-term entry points for patient investors willing to endure potential near-term volatility.