Author: Nan Zhi, Odaily Planet Daily
In the previous article (Reviewing the past 4 years of market data, what phase of a bull market are we in?), we based our analysis on four years of market and price data starting from 2020. We found that the fee rate, active buy transaction amount, and total transaction amount are effective leading indicators of the market. However, these three indicators provided two completely opposite conclusions. The fee rate indicates that the current market has just entered a slightly FOMO phase from a calm period, but the active buy transaction amount and total transaction amount have already reached historic highs, indicating a peak phase.
The author believes that the divergence in the indicator conclusions is mainly caused by the rise of Bitcoin spot ETFs and the prevalence of 'MicroStrategy-style' holding strategies. These funds, which are outside the 'traditional cryptocurrency circle', have led to a continuous increase in Bitcoin prices and trading volumes. On the other hand, their trading is isolated from CEX platforms like Binance, and the leverage forms are completely different, resulting in a disconnect between fee rates and prices.
Therefore, the author aims to explore what phase in a bull market we are ultimately in through other more general, intuitive, and historically longer-standing indicators.
MVRV-Z score
MVRV (Market Value to Realized Value Ratio) is an algorithm used to assess whether the market is overvalued or undervalued, achieved by comparing Bitcoin's current market value and realized value.
Here, market cap refers to the circulating market capitalization, while realized value refers to the total sum of the last moving price of each Bitcoin. For example, if 100,000 Bitcoins were last transferred three years ago at a price of $65,000, it would be recorded as 100,000 × 65,000, and so on to calculate the total value. The MVRV can be obtained by dividing the market cap by the realized value.
The algorithm for the MVRV-Z score is (market cap - realized value) ÷ market cap standard deviation. This method excludes short-term price noise and is more suitable for capturing extreme market sentiment.
According to Coinglass, the current value of MVRV-Z is 3.2, close to the peak of November 2021, but still quite far from the peaks in the first half of 2021 and the end of 2017.
ahr 999 index
The Bitcoin ahr 999 index is a parameter proposed by ahr 999 in 2018 to guide Bitcoin accumulation. According to ahr 999's statistics from that year, 8.5% of the time the index was below 0.45, defined as the bottom-buying range; 46.3% of the time it was between 0.45 and 1.2, defined as the dollar-cost averaging range; and 29.3% of the time it was above 1.2, which is the waiting for a stop-loss range.
According to Coinglass, the current value of this indicator is 1.49, relatively close to this year's peak of 1.75, but still quite far from the two peaks of 2021 at 6 and 3.4.
PlanB: Bitcoin will rise to $150,000 in December
PlanB and his Stock-to-Flow model (S2F) were revered during the bull market from 2019 to the first half of 2021 for successfully predicting Bitcoin reaching $55,000 at the beginning of 2021, but deviated in the second half of 2021 and completely failed in 2022.
As Bitcoin leads the market again, PlanB begins to return to the market. Yesterday, PlanB posted on platform X that, based on its speculation about Bitcoin's market trends over the next few years released at the end of September, BTC has basically achieved the first two targets: rising to $70,000 in October and to $100,000 in November (actually $99,800 but close enough). The next target for BTC is to rise to $150,000 in December.
Interest rate cut cycle
In the article (Summarizing the patterns of 35 years of US interest rate cycles, can a rate cut after 36 days trigger the second round of Bitcoin bull market?), the author summarizes the performance of US stocks and gold during the five interest rate cuts in the past 35 years, concluding that whether or not there is a rate cut is not the fundamental reason for market fluctuations. The impact of rate cuts on future markets depends on the overall economic situation at that time, whether the cuts are made to promote economic development or are forced by black swan events. From the perspective of the US stock market, it is a struggle between economic resilience and liquidity easing pricing.
To make a comparison akin to carving a boat to seek a sword, the current interest rate cut cycle is most similar to that of 1989, when the United States experienced seven years of expansion and faced high inflation pressures in 1988-1989, responding with extremely high interest rate hikes, with the peak interest rate nearing 10%. In the following three years, the US began a continuous interest rate cut, from 9.75% on February 24, 1989, to 3.00% on September 4, 1992.
According to the dot plot published in September, the Federal Reserve's interest rate is expected to decline from the current 4.75% to about 2% over the next two years. How has the market performed historically after interest rate cuts? It can be divided into two phases: 1989 and 1995. During the first three years of the interest rate cut cycle, the US stock market continued to fluctuate. In 1992, the rate cuts were halted and maintained for two years. After a brief preventive rate hike in 1994, there were no significant adjustments to interest rates, leading to a continuous bull market in US stocks. Therefore, from a macroeconomic perspective, we are still in the early to mid-phase.
Other classic indicators
Fear and Greed Index
Today's Greed Index is 76, showing a decline from the peak, with the recent peak being 94 on November 22, when Bitcoin's price was $95,829. This greed value exceeds the levels of November 2021 and March 2024 and is at the same level as the peak of February 2021 at 95.
200-week moving average
Historically, Bitcoin's price typically bottoms near the 200-week moving average, while significant deviations from this average indicate a peak. At the peak in 2021, Bitcoin's price was about four times the 200-week average, while currently it is about twice (96,500: 41,500), still at a relatively low point.
