Every month, Cathie Wood and her team at Ark Invest release a report on the state of Bitcoin (BTC -1.25%). You could think of it as a monthly earnings report that analyzes the fundamentals of the Bitcoin blockchain and other macroeconomic factors that affect its price. 

The reports are retrospective and analyze the previous month, so the most recent one looked into Bitcoin's metrics in January. 

With the token's price increasing by nearly 40%, its best month since October 2021, there was no shortage of action taking place on the blockchain. Here's a condensed version of what Ark analysts think about its current position.

A reversal of trends shows capitulation might be over

For much of 2022, the cryptocurrency market was riddled with controversy. These scandals spelled disaster for prices, and Bitcoin was not spared.

However, the resurgence in January has provided renewed optimism, and it's evident in a handful of key blockchain metrics that seem to have finally bottomed out and even reversed since the beginning of 2023. 

The 200-day moving average takes Bitcoin's price over the previous 200 days and turns its volatile price into a smoother line. Although, analysis of charts like the 200-day moving average aren't always reliable predictors for future performance, Ark analysts keep an eye on this metric because it is often considered to be an easy way to gauge momentum and overall market sentiment.

After remaining below the 200-day moving average since December 2021, Bitcoin gained enough momentum to finally cross the threshold on Jan. 13. Only time will tell if it stays there, but analysts believe this is telling of a possible bottom in Bitcoin's price. 

Among the other more-interesting findings from the report were trends found in the "spent output profit ratio" (SOPR). Ark created this statistic to measure the average purchase price and the sale price of each Bitcoin in circulation.

A SOPR value above 1 is indicative of the broader market being at a profit, and levels below 1 mean they are posting a loss. After remaining below 1 since April 2022, the SOPR finally mustered some momentum in January and reached a value just above 1, indicating that the broader market is no longer at a loss. 

Ark analysts say they believe that if the SOPR remains above 1, a coming "bull market will be confirmed."

Solid fundamentals in a tough economic backdrop

While these metrics help paint a clearer picture of Bitcoin's recovery, Ark believes there are still some macroeconomic factors that could stymie continued momentum. A decrease in the money supply and an inverted yield curve are of main concern to Ark. 

For the first time since the Great Depression era and post-World War II, the U.S. money supply is decreasing. In Ark's view, when this happens, it can constrain growth for risk-on assets such as Bitcoin. 

In addition, Ark is concerned that the inverted yield curve in the bond markets could be telling of a looming recession. And if that does come to fruition, it could put an end to any hopes for a Bitcoin bull market. 

Ark's analysis is extremely detailed and robust. There is a lot to digest, but the general tone of the report is optimistic. Activity on Bitcoin's blockchain shows that capitulation (strong selling pressure) might be at its end as key trends have reversed.

Although the economic backdrop remains obscure, there is reason for some cautious optimism in Bitcoin's price. It will likely be a bumpy road. But in preparation for an eventual return of a bull market, an investment in the crypto today looks like a bargain with its price still well below its all-time high of $68,000.