Re-examining the state of the Bitcoin market: The main uptrend is coming, how to seize the opportunity to escape the top

Tác giả gốc: Chandler, Foresight News

In August, we analyzed the market situation at the time based on the on-chain large-cycle data in the article Amid Wide and Large Fluctuations, the Current Situation of Bitcoin Based on Large-Cycle Data and believed that the market was experiencing a period of severe and wide fluctuations.

However, multiple key on-chain indicators show that the market has not yet entered the typical bull market main upswing. Both the MVRV Z-value and the Puell multiplier show that the market has risen but has not yet reached its historical high, while the 200-week moving average continues to provide strong support for prices, indicating that the market correction may be nearing its end.

We seem to have ushered in a new round of bull market that cannot be completely cut the boat to find the sword. In particular, the introduction of spot ETFs has brought more institutional investment funds, increased market participation and liquidity, but also brought new complexities to the market.

In addition, with the political changes brought about by the US election, especially the expectations of mật mã-friendly policies after Trumps victory, new volatility has emerged in the crypto market.

At this stage, the price of Bitcoin has broken through the long-term fluctuation range and has risen by about 40% in just ten days, from $66,800 to a peak of about $93,200. Chợ sentiment is unprecedentedly high, and various investors have entered the market, spreading optimism.

However, when others are full of greed, we need to maintain a sense of awe for the market.

In this context, we might as well return to the on-chain data and re-examine the market status of Bitcoin to assess what stage this bull market has reached. By observing key on-chain indicators, we can more calmly analyze whether the market still has room for further upward movement or is gradually approaching a stage top. This rational perspective helps us stay sober in the market frenzy so that we will not be swept away by blind optimism in the continued heat of the bull market.

Bitcoin MVRV Z-value: Still optimistic

The MVRV ratio is one of the most popular and widely used chain indicators. The MVRV (Market Value/Realized Value) ratio is a commonly used on-chain analysis indicator that evaluates the unrealized profit or unrealized loss in the market by measuring the relationship between the market price and the realized price of Bitcoin. Introduced by Murad Mahmudov and David Puell in 2018, this indicator has become a key tool for Bitcoin market cycle analysis, used to find market highs and lows, and identify turning points in the cycle.

The MVRV Z-score is a further extension of the MVRV ratio, using the concept of standard deviation in statistics to more accurately measure the extremes of the Bitcoin market. By calculating the degree of deviation between market value and realized value, the MVRV Z-score can identify extreme overvaluation or undervaluation of market prices relative to realized value. This indicator is usually represented by an orange line. When it enters the pink area above, it means that the market is overvalued, which often occurs at the top of a bull market cycle; when it enters the green area below, it means that the market price is severely undervalued, which often occurs at the bottom of a bear market.

Currently, after a period of correction and rise, the MVRV Z value has not yet reached the extreme highs of previous bull markets. This position indicates that the market price of Bitcoin is in a relatively optimistic upward range, and there may be some room for the market to overheat or reach a cyclical high.

Puell Multiplier: Not Yet Peaked

The Puell multiplier is another indicator that is consistent with the cycle peak. This indicator calculates the ratio of current miner revenue to the average of the past 365 days. Miner revenue is mainly the market value of newly issued Bitcoin (the new Bitcoin supply will be obtained by miners) and related transaction fees. It can be used to estimate the miners income status.

The formula is: Puell multiplier = miner income (newly issued Bitcoin market value) / 365-day moving average miner income

The Puell multiplier is mainly used to measure the selling pressure of Bitcoin miners. Initially, the Puell multiplier only calculated the block rewards of miners. As the proportion of transaction fees in miners income increased, Puell updated the formula to include transaction fees to reflect a more comprehensive miners income.

The purpose of this indicator is to help traders understand the extent of selling pressure from miners: when the Puell multiplier enters the green zone, it means that the daily issuance value of Bitcoin is abnormally low, which is usually a good opportunity to buy at the bottom. Investors who buy in these periods have historically received excess returns. On the contrary, when the Puell multiplier enters the red zone, it indicates that miners income is significantly higher than the historical standard. At this time, the price of Bitcoin often reaches a high point, which is a favorable time to take profits.

Previously, Bitcoin’s low was close to the green area, and it is currently in a slow rise phase, but it is still a long way from the high in the red area.

2-year MA multiplier, or 200-week moving average heat map:

Bitcoins 2-year MA multiplier and 200-week moving average heat map are both indicators used to analyze the long-term trend of Bitcoin prices. The 2-year MA multiplier refers to the ratio between the Bitcoin price and its 2-year (about 24 months) simple moving average (SMA), which is used to measure whether the market price of Bitcoin deviates from the long-term average. It helps to determine whether the Bitcoin price is relatively overvalued or undervalued.

Bitcoins 200-week moving average (200 WMA) is a very important long-term trend indicator, often used to measure the long-term health of Bitcoin prices. This indicator shows the average price over the past 200 weeks (about 4 years), reflecting the long-term cycles and price fluctuations of the market.

The 200-week moving average heat map visualizes the ratio of Bitcoin’s current price to the 200-week MA, reflecting the market’s “overheated” or “overcooled” state.

The heat map shows the cyclical fluctuations of the Bitcoin market. When the Bitcoin price is in the blue state for a long time, it means that the market is still in a relatively balanced state. When the heat map turns to green, orange or even red, it indicates that the market may be overheated, the price is far higher than the long-term average, and there may be a risk of price correction.

It can be seen that the current market is still in a relatively healthy state, and large-scale FOMO sentiment has not yet begun to spread.

Strong demand vs. crazy supply

According to the detailed data compiled by on-chain analyst @Murphychen, the current Bitcoin market is in a stage where demand and supply are extremely contradictory, reflecting the extreme volatility of market sentiment.

Especially driven by the excitement of American investors, strong demand has pushed Bitcoin prices to new highs. At the same time, the supply pressure in the market is also rising sharply. The continuous distribution of miners and long-term holders (LTH) has caused a large amount of hot supply in the market, which usually only occurs under extreme market sentiment, such as FOMO or panic.

In particular, on November 13, the surge in market supply broke through the high point in March this year, and the distribution of funds from the Grayscale ETF had not yet ended. There is no similar event as a driving force now. This surge in supply is similar to the market panic period when Bitcoin fell to $16,000 in November 2022, showing a huge contrast in current market sentiment. The behavior patterns of long-term holders also further confirm the selling pressure in the market. Although there is no obvious peak signal yet, the continued distribution of LTH has pushed the market into the medium risk area, approaching the critical point of accelerated distribution.

Despite the increasing supply pressure in the market, strong demand still supports the upward trend of Bitcoin prices. In particular, since November 11, the surge in investor sentiment in the United States has become an important factor driving the price increase. Data shows that from October to November, the dominant force in the market shifted from Asia and Europe to the United States, and this shift made the driving force of the market more obvious. With the increase in demand, the markets profit-making ability is also rising rapidly, indicating that demand is not just a short-term phenomenon, but a strong driving force that has lasted for some time.

However, the crazy sentiment in the market also reminds us that although there is no obvious peak signal at present, there may be a risk of bubble behind the excessive supply and growing demand. When the market demand and supply reach a critical point at a certain moment, the bursting of the bubble may happen at any time. Investors should remain rational and alert at this time, realize the unpredictability of the market, and avoid getting lost in the frenzy. Therefore, although there seems to be room for growth in the short term, the imbalance between supply and demand in the market may indicate potential risks in the future.

This article is sourced from the internet: Re-examining the state of the Bitcoin market: The main uptrend is coming, how to seize the opportunity to escape the top?

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