In the latest edition of Capriole Investments’ “Bitcoin Update,” Charles Edwards, founder and CEO, examines the current state of Bitcoin through a detailed analysis of thirteen on-chain indicators to address the critical question: Is the Bitcoin cycle top in?

A month after a promising technical breakout above $65.5K, which briefly touched $70K, Bitcoin experienced a sharp reversal, suggesting a possible cycle top. Edwards notes, “Never before has Bitcoin broken a new all-time high and had two retests instead of printing new highs.” This pattern, according to him, indicates a potential size-related consolidation but is generally a sign of market weakness.

Bitcoin On-Chain Data Analysis

#1 Supply Delta + 90 Day CDD: These metrics provide a strong indication of cycle tops by displaying supply movements and coin destruction days. The recent data formed a rounded top after a vertical increase in both metrics, which historically corresponds with market peaks. Edwards rates this as bearish, implying that the supply dynamics are signaling a downturn.

#2 Long-term Holder Inflation Rate: Historically, a threshold of 2.0 in this metric has been a reliable predictor of cycle tops. The rate has escalated from 0.5 in April to 1.9, now teetering close to this critical level. This proximity suggests that long-term holders are becoming increasingly likely to sell, marking another bearish indicator.

#3 Hodler Growth Rate (HGR): This measures the net growth of long-term holders. A decline or plateau in this rate often precedes market tops, as it indicates long-term investors cashing out. Currently, the HGR has not made new highs in over six months, aligning with historical precedents of cycle tops and thus is scored bearish.

#4 Bitcoin Heater: Analyzing extreme readings in funding, basis, and options, this metric stands neutral in the current cycle, indicating no significant market exuberance that typically precedes market tops. Furthermore, the absence of new leverage in the market contributes to this neutral stance.

#5 Dynamic Range NVT: This valuation metric compares on-chain transaction volume to market cap, recently moving out of the value zone due to increased on-chain activity from innovations like Ordinals and Runes. Despite this increase, it remains neutral, suggesting a balanced market valuation.

#6 On-chain Transaction Fees: Elevated transaction fees typically indicate high network demand, which can point to cycle peaks when followed by a sharp decline. Current fees have shown some spikes but largely mirror the decline noted in April. This metric remains neutral but is something Edwards advises to watch closely.

#7 Net Unrealized Profit/Loss (NUPL): Positioned just below the euphoria zone at 74%, the NUPL suggests that most market participants are in profit, but not excessively so. This delicate balance leaves the metric in a neutral state, reflecting potential caution but not outright exuberance.

#8 Spent Volume 7-10 years: A significant increase in spent volume from older coins typically suggests selling by long-term holders or “whales,” which can precede a market top. The massive transaction on May 28, involving 138,000 Bitcoin, primarily from Mt. Gox distributions, marks this as bearish, indicating potential market pressure from large-scale sell-offs.

#9 SLRV Ribbons: This metric, which looks at short and long revert ribbons, shows a bearish crossover for the first time this year. While it hasn’t reached an elevated point suggesting a cycle top, the recent trend is concerning and contributes to the bearish outlook.

#10 Dormancy Flow: With dormancy flow peaking significantly this year, the average age of spent coins is higher, similar to peaks seen in 2017 and 2021. This continuation of a high dormancy flow rate is bearish, suggesting a potential cycle top is near.

#11 Percent Addresses in Profit: Over 95% of addresses being in profit usually precedes a cycle top. With the recent high and subsequent decline, this indicator turns bearish, signaling that many investors might be taking profits, which could lead to a price drop.

#12 Mayer Multiple: Despite a peak at 1.9 in March, the Mayer Multiple remains below the 2.5 threshold that has historically indicated major cycle tops. Currently at 1.0, this metric is neutral, indicating that while the market is heated, it hasn’t reached the extremes of previous cycle peaks.

#13 US Liquidity: The correlation between liquidity and Bitcoin’s price is strong, and recent trends show a persistent downtrend in liquidity, which Edwards finds concerning. This negative liquidity growth aligns with a bearish outlook for Bitcoin.

What Does This Mean For The Bitcoin Cycle?

Out of thirteen metrics analyzed, eight are currently bearish, five remain neutral, and none are bullish. This predominance of bearish indicators suggests that the cycle top could very well be in, marking a potential pivot point for Bitcoin. “I won’t lie, I find this on-chain data hard to believe. I am surprised by the count of Bearish signals for being just two months post halving,” Edwards noted.

Despite the bearish lean in on-chain metrics, he highlights the importance of considering technical patterns and broader market behavior. Bitcoin’s price is currently above the $58K support level, and the potential formation of a Wyckoff Accumulation pattern on the daily chart suggests that the market could still hold bullish potential.

However, the mixed signals necessitate cautious optimism and vigilant risk management. “Fundamentals look bearish, but technicals are still bullishly skewed. That leaves ambiguity here. All of the bearish Top Signals could be the result of typical summer months inactivity. Or perhaps this cycle will be a bit more like 2013 with a double top, or some hybrid mid-cycle grind that we must go through now given we are playing in the big league with the TradFi today,” Edwards remarked.

However, he also concluded, “My gut tells me this is just an exceptionally bad summer period for Bitcoin on-chain activity, and we will see what is usually the best 12 month window for Bitcoin risk-adjusted returns post-Halving resume in Q4 and beyond.”

At press time, BTC traded at $62,747.

Featured image created with DALL·E, chart from TradingView.com

The crypto world is grappling with a million-dollar question – what is the German government doing with its massive Bitcoin holdings? According to data by Lookonchain, the recent transfer of 1,500 BTC, valued at roughly $95 million, has sparked a frenzy of speculation, with seasoned investors both worried and intrigued.

The Looming Shadow Of A Crypto Price Crash

Seasoned crypto veterans are haunted by the specter of a government fire sale. Memories of June’s $195 million transfer by the German government, which triggered a 3.5% price dip for Bitcoin, cast a long shadow.

Analysts like Vijay Pravin, CEO of BitsCrunch, warn of a “more pronounced downturn” if large-scale disposals occur. The fear is that a flood of Bitcoin hitting the market could overwhelm buyers, driving down the price.

The German Government transferred 1,500 $BTC($94.7M) out again in the past 20 minutes, of which 400 $BTC($25.3M) was transferred to #Bitstamp, #Coinbase and #Kraken.

German Government currently holds 44,692 $BTC($2.82B).https://t.co/6V5KFoyQa7 pic.twitter.com/35yMQIcMA8

— Lookonchain (@lookonchain) July 1, 2024

Beyond The Sell-Off: Unveiling The German Endgame

While a government-induced price correction is a major concern, some experts posit a more nuanced motive behind the transfer. The move could be part of a portfolio rebalancing act. Governments, like any investor, need to diversify their holdings to mitigate risk. Shifting some Bitcoin to other assets could be a way to achieve a more balanced portfolio.

Another possibility is that this is a prelude to future trades. The German government may be planning to buy or sell Bitcoin at a later date, and this transfer could be a preparatory move to position their holdings on exchanges. This strategy hinges on them anticipating future price movements, which is inherently risky.

As of today, the market cap of cryptocurrencies stood at $2.2 trillion. Chart: TradingView.com

A third intriguing theory suggests this might be a test of market liquidity. By dipping their toes into the exchange pool with a small transfer, the German government could be gauging the market’s ability to absorb a larger sale in the future. This would be a calculated move to minimize potential price disruptions from any future Bitcoin disposals.

Germany’s Massive Bitcoin Holdings

The German government’s actions highlight the growing influence of institutional players in the crypto market. According to figures from the onchain analysis platform Arkham Intelligence, Germany’s Bitcoin holdings is currently valued at a staggering $2.82 billion.

This showcases their increasing involvement in this dynamic space. Their decisions, whether selling, buying, or simply rebalancing, have the potential to significantly impact market trends.

Bitcoin In The Green

Despite the jitters caused by the German transfer, Bitcoin’s overall outlook remains positive. The leading cryptocurrency is currently trading at a healthy $62,947, with a market capitalization exceeding $1.24 trillion.

Featured image from Plisio, chart from TradingView

The world of cryptocurrency is witnessing a boom in accessibility, with Bitcoin ATMs leading the charge. From a meager 10,000 in October 2020, the number of these cash-to-crypto converters has ballooned to over 38,000 globally. This surge isn’t just a fad; experts predict continued growth fueled by a perfect storm of convenience, profitability, and strategic expansion.

Beyond The Bank Branch: Stepping Into Crypto With Cash

For many, traditional financial institutions remain a barrier to entry in the crypto world. Bitcoin ATMs bridge this gap by allowing users to buy cryptocurrency with cash, eliminating the need for bank accounts or navigating complex online exchanges. This fosters financial inclusion, particularly for the unbanked population and those who prefer the familiarity of physical cash.

Source: Coin ATM Radar

The benefits extend beyond accessibility. Bitcoin ATM transactions often offer a layer of privacy compared to online exchanges, where users might need to provide extensive personal information. Additionally, some users value the immediate nature of the transaction – cash goes in, cryptocurrency goes straight to their digital wallet. This eliminates the waiting period associated with bank transfers commonly used on online exchanges.

A Lucrative Market With Room To Grow

The growth of Bitcoin ATMs isn’t solely driven by user demand. Operators are finding these machines to be a lucrative business proposition. Transaction fees charged on top of the spot price of Bitcoin provide a healthy profit margin.

With the crypto market experiencing a bullish year in 2024, the potential for even greater returns is enticing for entrepreneurs venturing into this space. As of the most recent count, there were 38,279 deployed Bitcoin ATMs worldwide, according to statistics available on Coin ATM Radar.

Bitcoin market cap currently at $1.23 trillion. Chart: TradingView.com

As the cryptocurrency market has recovered over the past 11 months, about 6,000 new crypto ATMs have been installed; these are made by 43 different companies and are available in 72 countries.

Bitcoin remains the leading digital asset used in crypto ATM transactions, followed by Bitcoin Cash and Ether, the world’s second-largest cryptocurrency. While over 80% of crypto ATMs are currently installed in the US, a growing market is emerging in countries like Canada, El Salvador, Germany, Hong Kong, and Spain.

Governments Greenlight Crypto Growth

Furthermore, regulatory environments in many countries are becoming increasingly crypto-friendly. Governments are recognizing the potential of digital assets and are implementing frameworks that support the responsible growth of the industry. This regulatory clarity fosters trust and encourages further investment in Bitcoin ATMs, expanding their reach and solidifying their role in the financial landscape.

Challenges And The Road Ahead

Despite the optimistic outlook, the Bitcoin ATM industry isn’t without its hurdles. Some operators lack the necessary experience or financial backing to navigate the complexities of this nascent market. This can lead to security vulnerabilities and ultimately hinder user confidence. Additionally, regulatory uncertainties persist in certain regions, creating a wait-and-see approach for potential investors.

Industry leaders are actively addressing these challenges. Educational initiatives are being rolled out to inform users about the benefits and risks associated with cryptocurrency transactions. Additionally, robust customer support systems are being established to ensure a smooth user experience. Building trust and fostering a sense of security will be paramount in encouraging wider adoption of Bitcoin ATMs.