After reaching new all-time highs earlier this year, Bitcoin has entered a multi-month period of choppy price action, leading many to wonder if the bull cycle is over. In this article, we’ll dive deep into key stats and trends to understand whether the market is merely cooling off or if we’ve already seen the peak of this cycle.
Fundamentally overvalued?
One of the most reliable tools for measuring Bitcoin’s market cycles is the MVRV Z-scoreThis metric measures the difference between Bitcoin’s market capitalization and the realized capitalization, or cost basis, for all circulating BTC, and helps investors determine whether Bitcoin is over- or undervalued according to this “fundamental” cost of BTC.
Recent data shows that the MVRV Z-Score has been showing a sustained downward movement, which could suggest that Bitcoin’s upward movement has come to an end. However, historical analysis tells a different story. During previous bull cycles, including those in 2016-2017 and 2019-2020, similar declines in the MVRV Z-Score were observed. These periods of pullback were followed by significant rallies, leading to new all-time highs. So while the current downtrend seems worrying, it is not necessarily an indication that the bull cycle is over.
The MVRV Momentum Indicator helps differentiate between bull and bear cycles by applying a moving average to the raw MVRV data. It recently dipped below the moving average and turned red, which can signal the start of a bear cycle. However, historical data shows that similar declines have occurred without leading to a prolonged bear market.
Are you struggling under resistance?
Another essential metric to consider is the Realized price of Short-Term Holder (STH)which represents the average price at which recent market participants have purchased their Bitcoin. Currently, the STH Realized Price is around $63,000, slightly above the current market price. This means that many new investors are holding Bitcoin at a loss.
However, during previous bull cycles, Bitcoin’s price dropped below the STH Realized Price multiple times without signaling the end of the bull market. These drops often provided investors with opportunities to accumulate Bitcoin at discounted prices before the next surge.
Investor capitulation?
The Output Profit Ratio (SOPR) assesses whether Bitcoin holders are selling at a profit or a loss. When the SOPR is below 0, it suggests that more holders are selling at a loss, which could indicate market cap gains. However, recent SOPR data shows only a few instances of selling at a loss, which were short-lived. This implies that there is no widespread panic among Bitcoin holders, which is typically seen during the early stages of a bear market.
Historically, short periods of selling at a loss during a bull cycle have been followed by significant price increases, as seen in the 2020-2021 run-up. Therefore, the lack of sustained losses and capitulation in the SOPR data supports the view that the bull cycle is still intact.
Diminishing returns?
There is a theory that each Bitcoin cycle has diminishing returns, with lower percentage gains than the previous cycle. If we compare the current cycle with the previous oneit is clear that Bitcoin has already surpassed both the 2015-2018 and 2018-2022 cycles in terms of percentage gains. This outperformance could suggest that Bitcoin has gotten ahead of itself, necessitating a cooling-off period.
However, it’s also important to remember that this cooling-off period doesn’t mean the end of the bull market. Historically, Bitcoin has experienced similar pauses before resuming its upward trajectory. So while we could see more sideways or even downward price action in the short-term, it doesn’t necessarily mean the bull market is over.
The Hash Ribbons buy signal
One of the most promising indicators for Bitcoin’s future price movement is the Hash ribbons Buy Signal. This signal occurs when the 30-day moving average of Bitcoin’s hash rate crosses above the 60-day moving average, indicating that miners are recovering after a period of capitulation. The Hash Ribbons Buy Signal has historically been a reliable indicator of bullish price action in the months that follow.
Bitcoin recently showed its first buy signal since its halving earlier this year, suggesting that Bitcoin’s price could take a positive turn in the weeks and months ahead.
Conclusion
In summary, while there are signs of weakness in the Bitcoin market, such as the dip in the MVRV Z-Score and the STH Realized Price, these metrics have exhibited similar behavior in previous bull cycles without signaling the end of the market. The lack of widespread capitulation, as indicated by the SOPR and the recent Hash Ribbons Buy Signal, provides further confidence that the bull cycle is still intact.
For more in-depth information on this topic, you can watch a recent YouTube video here: