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Ark Invest, led by the visionary Chief Executive Officer Cathie Wood, has risen to prominence in recent years due to its innovation-centric investment strategies. Its priorities on assets with disruptive potential such as DNA sequencing, artificial intelligence (AI), and blockchain technology make the firm a natural fan and notable advocate of Bitcoin(BTC 3.33%) thanks to its status as the most decentralized, secure, and valuable cryptocurrency.

To shed more light on Bitcoin, Ark publishes a comprehensive report every month delving into blockchain-based metrics, investor behavior trends, and macroeconomic factors, providing valuable context on the crypto's status and potential trajectory. In the firm's most recent report, for the month of September, several crucial insights and trends were highlighted, suggesting the path Bitcoin might take in the coming months.

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One of the key indicators emphasized in Ark's report is the remarkable rise in the percentage of long-term holders. Now at an all-time high, 76% of Bitcoin's total available supply hasn't moved in more than 155 days, the point at which short-term holders change to long term.

This time frame might seem arbitrary, but analytics firm Glassnode has found it to be a statistically significant benchmark as those who hold past 155 days are more likely to be smart-money investors and can provide insight into market sentiment.

Ark's analysts point out that this trend of an increasing number of long-term holders aligns with other transitional periods in Bitcoin's history, suggesting that this bear market might not be fundamentally different from previous ones.

Typically, long-term holders enter the market in droves and pick up coins on the cheap, creating an accumulation phase usually associated with post-bear markets and early stages of bull markets. Moreover, the increase in long-term holders further reduces the digital currency's already scarce supply, potentially setting the stage for a significant price surge should a bull market return.

Ark's embrace of innovation and admiration for Bitcoin extends beyond just an anecdotal report. The firm also creates unique metrics and indicators to assess its current position relative to past cycles. The latest report highlighted two specific statistics supporting Ark's stance that the cryptocurrency is currently trading at a relative discount.

The profit/loss ratio, comparing the number of coins transacted at a profit to those at a loss, currently hovers just above 1, indicating a decline in investor "exuberance" compared to earlier in the year, when Bitcoin's price jumped more than 80% in just five months. When reaching these levels in the past, the crypto was either in the depths of a bear market or clawing its way back into a bull market. Ark sees it as the latter.

Ark highlighted another crucial metric, the realized-profits-to-realized-cap ratio, which is currently at its lowest point since the beginning of the year, further indicating oversold conditions. This ratio measures profit-taking among Bitcoin investors against its realized cap, rather than the more commonly used market cap. Since realized cap is calculated by multiplying the last price at which every Bitcoin was transacted instead of valuing every coin at its current price, it offers a more sensitive and less misleading assessment than market cap.

By quantifying the amount of realized profits against Bitcoin's realized cap, Ark is able to measure buying and selling activity more clearly. Considering Bitcoin has historically entered the oversold territory of this ratio only seven times in its history, today could be an opportune moment for investors.

Ark's report doesn't shy away from acknowledging current unfavorable macroeconomic conditions and the potential challenges they pose to Bitcoin's bull market return. The prolonged interest rate hikes and tighter liquidity anticipated in markets globally could present hurdles for cryptocurrencies since typically these assets have thrived in environments with liquidity surpluses.

However, despite short-term challenges, Ark remains bullish on Bitcoin in the long run. Its analysis suggests that the cryptocurrency's resiliency and favorable developments of on-chain metrics such as the number of active owners and mining difficulty, put it in a potentially lucrative position as it navigates the fine line between bear and bull markets.

RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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Cathie Wood's Latest Bitcoin Insights: Is Now the Time to Buy? - The Motley Fool