After hitting all-time highs earlier this year, Bitcoin has entered a period of price volatility that has lasted for months, leading many to wonder if the bull cycle is over. In this article, we delve into key metrics and trends to understand whether the market is just cooling off or whether we have already seen the peak of this cycle.
Basically overvalued?
One of the most reliable tools for measuring Bitcoin market cycles is Z-score for MVRVThis metric measures the difference between the market value of Bitcoin and its realized value, or cost basis, of all Bitcoins in circulation, helping investors determine whether Bitcoin is worth more or less than its true value according to this “base” cost of Bitcoin.
Recent data shows that the MVRV Z-Score has shown a sustained downward movement, which could indicate that Bitcoin’s bull run is over. However, historical analysis tells a different story. During previous bull cycles, including those in 2016-2017 and 2019-2020, similar declines were observed in the MVRV Z-Score. These periods of decline were followed by significant rallies, leading to new all-time highs. Therefore, while the current downtrend may seem worrisome, it does not necessarily indicate that the bull cycle is over.
the MVRV momentum The indicator helps distinguish between bull and bear cycles by applying a moving average to the raw MVRV data. It recently dropped below its moving average and turned red, which could signal the start of a bear cycle. However, historical data shows similar declines without leading to a prolonged bear market.
Struggle under resistance?
Another key metric to consider is: Short-Term Bond Price (STH)which represents the average price at which market participants recently acquired their bitcoins. Currently, the realized STH price is around $63,000, which is slightly higher than the current market price. This means that many new investors are holding bitcoins at a loss.
However, during previous bull cycles, Bitcoin’s price has dropped below the STH multiple times without signaling the end of the bull market. These dips often provided opportunities for investors to accumulate Bitcoin at discounted prices before the next rally.
Investor surrender?
the Spending Profit Percentage (SOPR) It measures whether Bitcoin holders are selling at a profit or at a loss. When SOPR is below 0, it indicates that more holders are selling at a loss, which may indicate a market capitulation. However, recent SOPR data shows only a few instances of loss selling, which were short-lived. This means that there is no widespread panic among Bitcoin holders, which is typically seen during the early stages of a bear market.
In the past, short-selling periods at a loss during a bull cycle have been followed by large price increases, as occurred in the lead-up to 2020 and 2021. Therefore, the lack of sustained losses and capitulations 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 relative gains lower than the previous cycle. If we Comparing the current cycle to previous cyclesIt is clear that Bitcoin has already outperformed the 2015-2018 and 2018-2022 cycles in terms of relative gains. This outperformance may indicate that Bitcoin has gotten ahead of itself, which necessitates a cooling-off period.
However, it is also important to remember that this cooling off period does not mean the end of the bull market. Historically, Bitcoin has seen similar pauses before resuming its upward trajectory. Therefore, while we may see more sideways or even bearish price action in the near term, this does not necessarily indicate that the bull market is over.
Hash Strips Buy Signal
One of the most promising indicators for Bitcoin’s future price movement is: retail strips Buy signal. This signal occurs when Bitcoin’s 30-day moving average hash rate crosses above its 60-day moving average, indicating that miners are recovering after a period of capitulation. Hash Ribbons buy signals have historically been a reliable indicator of bullish price action in the following months.
Recently, Bitcoin showed this buy signal for the first time since the halving event earlier this year, indicating that Bitcoin could see positive price action in the coming weeks and months.
conclusion
In short, while there are signs of weakness in the Bitcoin market, such as the decline in the MVRV Z-Score and STH Realized Price, these metrics have shown similar behavior in previous bull cycles without signaling an end to the market. The lack of widespread capitulation, as indicated by the SOPR and the recent buy signal from Hash Ribbons, provides further confidence that the bull cycle is still intact.
For a more in-depth look at this topic, check out our recent YouTube video here:
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