Bitcoin

Is The Bitcoin Cycle Top In? What 13 On-Chain Indicators Say

Published

3 days ago

July 2, 2024

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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.

Bitcoin price — BTC trades below $63,000, 1-day chart | Source: BTCUSD on TradingView.com

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

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Related Topics:Bitcoin Cycle Indicators OnChain Top

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Bitcoin

Bitcoin Crash: VanEck Sees an Opportunity

Published

2 hours ago

July 5, 2024

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VanEck remains optimistic as Bitcoin (BTC) price continues to nosedive in the aftermath of woes around the German government and Mt. Gox.

Market corrections are a dreaded scenario, spelling fear among traders. While the otherwise “weak hands” cower, the bold lot seize the opportunity to grow their bags.

VanEck Urges Traders: Buy Bitcoin During Market Panic

Describing the ongoing Bitcoin crash as “4th of July discounts,” VanEck sees BTC price falling to the $53,000 range as a ‘buy the dip’ opportunity. On-chain platform Santiment shares the sentiment, urging bold traders to seize the moment.

“Markets have continued to bleed, and social media is now showing historic levels of FUD. It is rare for an hour to go by where there are more mentions of “sell” than there are “buy” across crypto forums. But we’ve seen a few of these instances in just the past 24 hours, including the largest ratio of negative vs. positive comments thus far in 2024. For bold traders, this is a window where some may wish to be a true contrarian and buy into the crowd’s anger and frustration”.

Amid the negative market sentiment, crypto researchers observe elevated fear levels. This is warranted as many traders suffer losses. Hundreds of thousands are getting “rekt” amid an ongoing bloodbath. Derivative data analysis platform Coinglass reports over $650 million in total liquidations.

Pseudonymous trader CryptoNagato reported that this is the second-largest liquidation event in the Bitcoin market after the one right after the FTX collapse in November 2022. All indications point to the ongoing sell-off between Mt. Gox and the German government, with their voluminous transactions stirring markets.

In a Thursday post, German lawmaker and Bitcoin activist Joana Cotar slammed the government for its “hasty” actions selling Bitcoin. Calling the selling spree insensible and counterproductive, she urged the state to emulate the US and hold Bitcoin as a reserve currency.

“Instead of holding Bitcoin as a strategic reserve currency, as is already being debated in the USA, our government is selling on a large scale. I informed Michael Kretschmer, Christian Lindner, and Olaf Scholz, why this is not only not sensible, but counterproductive and invited them to our lecture event (Bitcoin Strategies for Nation States” on October 17th in the Paul-Löbe-Haus) with Samson Mow,” Cotar wrote.

Cotar’s pro-crypto stance was best seen in November when she backed Bitcoin as legal tender and advocated for its integration into mainstream German finance.

Whales Buy BTC at a Discount

Meanwhile, Ki Young Ju, co-founder and CEO of CryptoQuant, suggests that whales are buying the dip and effectively becoming true contrarians. Based on the report, these traders are opening long positions.

Whales in crypto are investors holding over 1000 BTC, which means they have the power to influence market prices due to their large portfolios. At the moment they are betting on the Bitcoin price increasing in the future.

Small Bitcoin whales opening long positions, — BTC Whales Open Long Positions. Source: CryptoQuant

CryptoQuant’s Young Ju shares the optimism, saying, “The upward cycle is not over yet.” Nevertheless, he indicates that the ongoing correction could bottom out around the $47,000 threshold, urging spot traders to wait for a strong buying trend. Looking at the weekly chart for the BTC/USDT trading pair, there is a demand zone around the $47,000 range.

Bitcoin price BTC/USDT 1-week chart, Source: TradingView — BTC/USDT 1-week chart, Source: TradingView

A demand zone is an area with significant buying interest. Market participants would be willing to step in and purchase Bitcoin at $47,000, effectively creating a support level that can potentially lead to a price reversal.

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Bitcoin

Mt. Gox Begins Bitcoin, Bitcoin Cash Payouts: Key Details

Published

7 hours ago

July 5, 2024

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Mt. Gox, a name synonymous with one of the most dramatic episodes in the cryptocurrency world, has started disbursing Bitcoin and Bitcoin Cash to its creditors. This significant move was announced on July 5, 2024, marking a pivotal turn in the long-drawn rehabilitation process of the defunct Bitcoin exchange.

Bitcoin and Bitcoin Cash’s prices have been volatile amidst this development.

Mt. Gox Still Holds Bitcoin Worth $7.69 Billion

The repayment initiative stems from Mt. Gox’s complex bankruptcy proceedings. The firm filed for bankruptcy after a massive security breach in 2014 that resulted in the loss of 850,000 Bitcoins.

“On July 5, 2024, the Rehabilitation Trustee made repayments in Bitcoin and Bitcoin Cash to some of the rehabilitation creditors through a part of the Designated Cryptocurrency Exchanges etc. in accordance with the Rehabilitation Plan,” Mt. Gox announced.

Creditors must meet several conditions before further disbursements. These include validating the registered accounts’ authenticity and finalizing agreements with the involved cryptocurrency exchanges.

Furthermore, the Trustee highlighted the necessity of ensuring secure and verified transactions before proceeding with more repayments. It also urged patience among the eligible creditors awaiting their turn.

In a related report earlier today, Arkham, a cryptocurrency analytics firm, noted that Mt. Gox had transferred 47,228 Bitcoins, worth approximately $2.71 billion, from cold storage to a new wallet. Despite this substantial movement, over 147,687 Bitcoins, valued at $7.69 billion, remain in the Mt. Gox reserves.

Following the repayment news, Bitcoin’s market price experienced a sharp decline, plummeting to $54,500. This price point is noted as the lowest in the past four months. Moreover, Bitcoin Cash’s price went below $290, down by over 18% in the past 24 hours.

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Bitcoin

Here’s Why The Bitcoin Price Crashed Below $58,000

Published

1 day ago

July 4, 2024

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Bitcoin has dropped to as low as $58,000 in the last 24 hours, having failed to once again hold above the crucial support at $60,000. Different analysts have suggested that the CME gap caused this price decline and that BTC could enjoy a relief bounce going forward.

The CME Gap Caused Bitcoin To Decline Below $60,000

Crypto analyst Daan Crypto hinted in an X (formerly Twitter) post that Bitcoin experienced this recent price decline to close the CME gap around the $60,000 range. The CME gap is the difference between BTC’s price on the Chicago Mercantile Exchange (CME) futures market between when the market closed on Friday and reopened on Monday.

While sharing a chart of Bitcoin CME futures, crypto analyst Speed Racer also alluded to the CME gap as responsible for Bitcoin’s recent decline. He stated that the market makers were running the BTC market in the short term as there was no way they would leave a “$1650 CME gap from the weekend.”

Crypto analyst Ninja also explained that the recent price decline was caused by the CME gap and even tagged it as “bullish selling.” He assured that everything would be okay, with a market rebound likely on the cards. Ninja also urged market Bitcoin bulls not to panic, although he subtly admitted that the current market conditions are enough to make anyone panic.

Fortunately, the worst looks to be over, as Daan Crypto revealed that the CME gap has been fully closed. This suggests that Bitcoin should enjoy a relief bounce from its current price level. Crypto expert Michael van de Poppe also confirmed that the CME gap has closed and predicted that it’s time for BTC to bounce up.

Crypto analyst Titan of Crypto shared a similar sentiment while revealing that the CME gap has been filled. He claimed that nothing was holding Bitcoin back now and that it was time for the flagship crypto to send. From the chart the analyst shared, BTC could rise to $72,000 on its next leg up.

The CME Gap Might Not Be The Only Problem

Selling pressure on Bitcoin is another problem that is responsible for its price decline. Data from Farside Investors shows that the Spot Bitcoin ETFs are still witnessing huge net outflows, with fund issuers having to offload their BTC holdings to fulfil redemptions.

There is also significant selling pressure from the German government, which still appears to be selling its Bitcoin holdings based on data from Arkham Intelligence. This is in addition to concerns about the selling pressure that BTC could witness once the defunct crypto exchange Mt. Gox begins to repay its creditors about $9 billion worth of crypto.

At the time of writing, Bitcoin is trading at around $58,600, down over 3% in the last 24 hours, according to data from CoinMarketCap.