The cryptocurrency market has been consolidating in the range of $60,000 to $70,000 for almost four months. While it is difficult to determine when it will rise again, I believe it is unlikely to be the cycle top. This article is sourced from @0xjaypeg and compiled by 深潮.
Summary:
Opinion: Is the Bitcoin market panic or a conspiracy by large mining companies?
Background: Probability of interest rate cut in September! Why is Bitcoin unaffected by the slowdown in May PCE data?
Table of Contents:
Market Value to Realized Value (MVRV)
Changes in Bitcoin Long-Term Holders
USD Supply
Coinbase jumps 106 spots in rankings in one day (they have received a large number of app downloads)
Bitcoin ETF inflows peak at $1.045 billion and then sharply decline.
A lot of very positive regulatory news
Miners actively selling during the post-halving slump
Is this the market top now?
Bitcoin has been hovering in the range of $60,000 to $70,000 for almost four months, which can be frustrating, but it is not uncommon. Usually, after a halving event, we see the market enter a period of consolidation. If we look back at the halving cycles in 2016 and 2020, we can observe similar consolidation phases followed by the so-called “banana area,” which is the final parabolic rise phase.
However, we should not be satisfied with just accepting that “past situations are like this” but rather try to analyze the current market conditions in order to learn from them and even profit from them. At first glance, the simplest and most obvious answer to why there is a lot of supply around $70,000 is:
– A large amount of capital entered the market before the halving event.
– Miners’ income halved, forcing them to sell.
– U.S. tax factors.
We can list countless reasons, but it is more meaningful to examine some objective indicators.
One such indicator is the Market Value to Realized Value (MVRV), which is the ratio between the weighted average purchase price of Bitcoin (i.e., the price at the last move) and the current market price. In short, it reflects the unrealized profit of Bitcoin.
The MVRV reached its peak in March at a ratio of 2.75, which means that when the Bitcoin price was $73,100, the average purchase price was $26,580. Although this indicator is not entirely accurate (for example, centralized exchanges may not move tokens but only update database entries), it usually rises in sync with the market price reaching its peak. At some point, people need to take profits, right?
Another interesting indicator is the change in the positions of long-term holders, defined as wallets holding Bitcoin for over 155 days. Tops usually form when these holders complete their sales, and bottoms form when they start buying.
From the end of January to the end of March, it is evident that the selling volume increased sharply. More importantly, they have now started to buy again.
Finally, considering that Bitcoin is priced in USD, observing the supply of USD is crucial. How much “money” is flowing in the market? And more importantly, is this quantity increasing or decreasing? Is the speed accelerating or decelerating?
I believe this chart explains everything—the growth rate of global M2 (an important factor of global liquidity) has significantly slowed down since the end of March/beginning of April. The market is forward-looking, and if the outlook for M2 slows down, the market will expect the USD to strengthen relative to cryptocurrencies (under other equal conditions).
In addition to these, there are many other signals:
– Selling at tops (including regional tops) is always difficult because they often last longer (or shorter) than we expect, and emotions make it difficult for us to remain objective. Furthermore, the market also influences us—we are cautious at the beginning of a breakout, then envy those who make more money than us (buying memes, increasing leverage), and finally try to replicate and “chase” to the end.
The good news is, I don’t think this is the cycle top (if the concept of cycle top still exists considering factors like ETFs). As I mentioned earlier, I believe this is quite typical in the weeks and months following a halving. Each cycle is obviously different, but I think the basic principles are generally the same:
– There can only be so much unrealized profit in the system.
– Tops are formed by long-term holders selling (bottoms are formed by buying).
– The rate of increase or decrease in USD supply.
These factors will manifest themselves differently depending on the participants’ positions.
I don’t think this is likely to be the cycle top. While it is difficult to say exactly when we will rise again, I believe we are closer to the end of breaking out of this range than at the beginning (hopefully in an upward breakout).