Written by: UkuriaOC, CryptoVizArt, Glassnode
Compiled by: Akechi
Currently, the Bitcoin market is in a counterintuitive position - most short-term holders are still losing money, but the average price is still 2 times higher than before. At the same time, many volatility indicators are severely affected at this time, indicating that greater market fluctuations may be coming.
Summary
Although the price of Bitcoin has not risen, a considerable number of investors have still made profits in the market. Short-term holders have borne most of the market losses.
Combining on-chain pricing models and technical indicators, this article will define and explore a range of possible scenarios for the future development of the market.
Volatility indicators continue to face unprecedented resistance, indicating that investors currently have no strong willingness to invest, and also indicating that market volatility may intensify in the future.
Market profitability remains strong
As the price of Bitcoin fell to $60,000, fear and pessimism permeated the market.
However, overall profitability for investors remains strong, with the average investor earning more than two times their money per bitcoin, as measured by the MVRV ratio, which typically marks the dividing line between the “enthusiasm” and “euphoria” phases of a bull market.
Figure 1: Bitcoin’s MVRV ratio
Combination of indicators to determine market expectations
Since Bitcoin hit an all-time high in March, its price has been consolidating in a range of $60,000 to $70,000. The market lacks a clear trend and investors are hesitant.
To determine the current price cycle position, we use a simplified framework to analyze the market:
Deep bear market: the trading price is lower than the actual price.
Early bull market: trading prices are between actual prices and true market mean.
Bull market enthusiasm period: trading prices are between historical highs and real market averages.
Bull market euphoria: prices are higher than the historical highs of previous cycles.
Currently, after several brief periods in and out of euphoria, the bull market is still falling back to the levels of previous enthusiasm. Currently, the average cost basis of active investors is about $50,000, which is the current real market average.
If the macro bull run is to continue, $50,000 remains the critical price threshold to keep the market excited.
Figure 2: Relationship between realized price, average real market price and the historical high price of the previous cycle
Analysis of short-term holder behavior
The behavior of short-term holders has a significant impact on market volatility. By overlaying their cost basis with the ±1 standard deviation level, we find that:
Large amounts of unrealized profits suggest the current market may be overheated, with the current value at $92,000.
The breakeven level for the short-term holder group is $64,000. At this time, the spot price is below this line, but the market is trending upward.
The large amount of unrealized losses indicates that the current market may be oversold, with the current value at $50,000. This is consistent with the real market mean and is a bull market critical point.
Figure 3: Analysis of short-term holder behavior
Analysis of profitability of short-term holder subgroups
Currently, the subgroups of 1 day to 1 week, 1 week to 1 month, and 1 month to 3 months are all losing money. This shows that the current consolidation range is basically unprofitable for these short-term holders.
Among all short-term holders, the March-June group remains the only subgroup to maintain unrealized profits, with an average cost basis of $58,000. This cost basis is consistent with the price low of this market correction, proving once again that this is a critical threshold to watch.
Figure 4: Realized price breakdown for short-term holders (holding time 1 day - 6 months)
Technical indicator analysis
The Mayer Multiple is a widely used indicator in market analysis that assesses the ratio between the current market price and its 200-day moving average. The 200-day moving average is often used as a simple indicator to assess bullish or bearish momentum, with any break above (or below) this indicator representing a significant turning point in the market.
The 200-day moving average is currently at $58,000, which again coincides with the on-chain price model.
Figure 5: Bitcoin’s Mayer Ratio
URPD is used to assess the concentration of Bitcoin supply around a specific cost basis.
Currently, there are a large number of Bitcoin suppliers between $60,000 and the all-time high, and the spot price is hovering at the lower price limit of these suppliers. This is also consistent with the cost basis model of short-term holders.
Currently, approximately 2.63 million Bitcoins (13.4% of the circulating supply) sit in the $60,000 to $70,000 range. Therefore, only small price fluctuations can significantly affect an investor's portfolio profitability.
Overall, this also shows that once the price falls below $60,000, investors will be extremely sensitive to any subsequent declines.
Figure 6: Bitcoin URPD (after physical adjustment)
Expected future volatility
After months of relatively low volatility, volatility has dropped significantly across many rolling windows. To visualize this phenomenon, we introduce a simple model to look for the calm before the storm - such a drop typically indicates that volatility may increase in the future.
The model evaluates the 30-day change in realized volatility over 1 week, 2 weeks, 1 month, 3 months, 6 months, and 1 year timeframes. When this change is negative across all timeframes, it indicates that market volatility is decreasing.
Figure 7: Bitcoin market volatility measurement
Another way to assess market volatility is to calculate the percentage difference between the highest and lowest prices over the past 60 days. From this indicator, we can see that market volatility has decreased to a level that is rarely seen in the past. In the past, this situation often occurred after a long period of consolidation and before the arrival of large market fluctuations.
Figure 8: Bitcoin price 60-day high and low
Finally, we can use the sell-side risk ratio to further assess market volatility. It assesses the absolute value of the sum of realized profits and losses locked in by investors relative to asset size (realized market value). We can discuss this metric under the following framework:
A high sell-side risk ratio indicates that when investors sell Bitcoin, they make a lot of money or lose a lot of money. This situation usually occurs after a high volatility price trend, indicating that the market is in urgent need of rebalancing.
The low seller risk ratio indicates that most sales of Bitcoin have small profits and losses, indicating that the market has reached a certain level of equilibrium. At this point, the "profit and loss potential" within the current price range has been exhausted, and the market environment has no obvious fluctuations.
It is worth noting that short-term investors’ sell-side risk has now fallen to historic lows — only 274 days (5%) out of 5,083 trading days have seen the market show lower levels. This suggests that a certain degree of balance has been established during the Bitcoin price consolidation period and suggests that volatility may increase in the near future.
Figure 9: Short-term holder-seller risk ratio
Summarize
The Bitcoin market is currently in a counter-intuitive position - despite the price being 20% below its all-time high, investors are uninterested. The average Bitcoin is holding up to 2x unrealized profits. However, new buyers are surprisingly mostly losing money.
In this article, we analyze this using a combination of on-chain and technical indicators and derive three key price ranges that will rekindle investor interest.
If Bitcoin falls below the $58,000 to $60,000 range, it will cause a large number of short-term holders to lose money and push the price below the 200-day moving average.
If it continues to hover between $60,000 and $64,000, the market will continue its previous sideways trend.
If the $64,000 mark can be broken, a large number of short-term investors will turn losses into profits, in which case investor sentiment in the market is likely to rise.
Judging from the current spot price and on-chain indicators, volatility has been declining in multiple time windows. Among them, indicators such as the seller risk ratio and the 60-day price range have fallen to historical lows. This indicates that the current sideways trend will not last long, and the market is about to start a new price breakthrough to the next range.