Authors | Nathan Frankovitz, Matthew Sigel
Compiled by | Wu Says Blockchain
With the regulatory tailwinds brought by Trump's election, Bitcoin successfully broke through historical highs. As market attention continues to rise, various key indicators suggest that the strong momentum of this bull market is expected to continue.
As we predicted in September, the price of Bitcoin (BTC) exhibited high volatility and an upward trend after the election. Now Bitcoin has entered an unknown territory with no technical price resistance, and we believe the next phase of the bull market has just begun. This pattern is similar to the post-election period in 2020, when Bitcoin prices doubled by the end of the year and further increased by about 137% in 2021. As the government's supportive attitude toward Bitcoin significantly shifts, investor interest is rapidly increasing. Recently, we have seen a surge in investment inquiries, with many investors realizing that their allocation in this asset class is significantly insufficient. While we closely monitor for signs of market overheating, we reaffirm our price target of $180,000/BTC for this cycle, as key indicators tracked show continued bullish signals.
Bitcoin price trends
Market sentiment
Bitcoin's 7-day moving average (7 DMA) reached $89,444, setting a new historical high. On election night, November 5, Bitcoin surged about 9% to reach a historical high of $75,000. This aligns with our previous observation: as the likelihood of Trump's victory increased, Bitcoin prices rose accordingly. Trump explicitly promised during the campaign to end the 'enforcement regulation' strategy of the U.S. Securities and Exchange Commission (SEC) and to make the U.S. the 'world capital of crypto and Bitcoin.'
After Trump's election as president, regulatory resistance turned into a driving force for the first time. Trump has begun appointing crypto-supportive officials in the executive branch, and with the Republican Party controlling the joint government, the likelihood of related supportive legislation passing has increased. Key proposals include plans to establish a national Bitcoin reserve and to rewrite the relevant legislation on crypto market structure and stablecoins, with FIT21 expected to be rewritten with market- and privacy-friendly terms, while new stablecoin drafts will allow state-chartered banks to issue stablecoins without Federal Reserve approval.
As countries like those in BRICS explore alternatives such as Bitcoin to bypass dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for the dollar's global outreach. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the U.S. can maintain the global influence of the dollar and leverage the faster adoption of cryptocurrency in emerging markets. These markets have a strong demand for financial services, hedging local currency inflation, and decentralized finance (DeFi).
We expect that the SAB will be repealed in the first quarter after Trump's inauguration, whether by the SEC or by Congress, prompting banks to announce cryptocurrency custody solutions. If Gary Gensler has not resigned, Trump may fulfill his promise to replace the SEC chairman with a candidate more supportive of crypto and end the agency's notorious era of 'regulation by enforcement.' Additionally, by 2025, the U.S. Ethereum (ETH) ETF will be revised to support staking, and the SEC will approve the 19b-4 proposal for the Solana (SOL) ETF, while the creation and redemption of ETFs in physical form will make these products more tax-efficient and liquid. Given that Trump has previously acknowledged the commonality of Bitcoin mining and artificial intelligence (AI) in terms of energy intensity, it is expected that energy regulation will be relaxed, making base-load energy (such as nuclear) cheaper and more abundant, thereby promoting the U.S.'s global leadership in energy, AI, and Bitcoin.
This election marks a bullish turning point, reversing the capital and job outflows caused by previous hardline policies. By stimulating entrepreneurial vitality, the U.S. is expected to become a leader in global crypto innovation and employment, turning cryptocurrency into a key domestic growth industry and an important export product for emerging markets.
Bitcoin dominance
The 7-day moving average of Bitcoin dominance (a measure of Bitcoin's market cap relative to the total market cap of all cryptocurrencies) rose 2 percentage points to 59% this month, reaching its highest level since March 2021. While this rising trend starting from 40% in November 2022 may continue in the short term, it could soon peak. In September, we noted that Harris's victory might enhance Bitcoin's dominance due to more defined regulatory status for Bitcoin as a commodity. In contrast, Trump's supportive stance on crypto and his expanded cabinet team may drive broader investments in the crypto market. As Bitcoin reaches new highs in an innovation-friendly regulatory environment, the wealth effect and reduced regulatory risks are expected to attract native capital and new institutional investors into DeFi, thereby enhancing the returns of smaller projects within the asset class.
Regional trading dynamics
At first glance, traders in the Asian market appear to have significantly increased their Bitcoin holdings this month, contrasting with the trend in recent years where Asian traders typically net-sold while European and U.S. traders net-bought. However, the surge in Bitcoin prices on election night occurred during the Asian trading hours, likely due to a large number of U.S. investors trading around the election. This unique event makes it difficult to attribute such price fluctuations solely to regional dynamics. Consistent with historical behavior, traders in the U.S. and European trading hours continued to accumulate Bitcoin, maintaining the price performance trend observed in October.
Source: Glassnode, 11/18/24 (past performance is not indicative of future results.)
Key indicators
To assess the potential upside and duration of this bull market, we analyzed several key indicators to evaluate market risk levels and possible price tops. This month, our analysis started with perpetual contracts (perps), where the performance of funding rates provides insights into market sentiment and helps measure the likelihood of market overheating.
Bitcoin prices typically show signs of overheating when the 30-day moving average funding rate (30 DMA Perp Funding Rates) exceeds 10% and persists for 1 to 3 months.
BTC average return rates compared to perpetual financing rates (January 4, 2020 - November 11, 2024)
When the 30 DMA annualized Perps fee exceeds 10%, BTC price performance
Source: Glassnode, as of November 12, 2024
Since April 2020, we analyzed periods when the 30-day moving average perpetual contract funding rates exceeded 10%. The average duration of these periods is approximately 66 days, with an average return from open to close of 17%, although the duration of each period varies significantly. The only exception is the single-day spike reaction on June 18, 2024, which reflects short-term market sentiment. Other cases have lasted several weeks, highlighting a structural bullish sentiment that often brings significant short- to mid-term returns.
For instance, the high funding rate phase that began on August 31, 2021, lasted for 23 days, followed by a 28-day cooling period, and then resumed for 51 days on October 19. Including this brief interval, the total duration of high funding rates in 2021 reached 99 days. Similarly, the current high funding rate phase, which started on November 12, 2024, has lasted for 80 days, followed by a 19-day interval, and then restarted for 69 days of high funding rates, totaling 168 days, comparable to the 186 days from November 11, 2020, to May 21, 2021. Notably, purchasing Bitcoin on days when funding rates exceed 10% yields higher average returns within 30-day, 60-day, and 90-day time frames compared to days with lower funding rates.
However, data shows a pattern of underperformance over longer time frames. On average, Bitcoin purchased on days when funding rates exceeded 10% has lagged behind the market starting from 180 days, with this trend becoming more pronounced in the 1-year and 2-year time frames. Since market cycles typically last about 4 years, this pattern suggests that persistently high funding rates are often associated with cycle tops and may serve as an early signal of market overheating, indicating a greater susceptibility to long-term downside risk.
Bitcoin cycle analysis
Source: Glassnode, as of November 13, 2024
As of November 11, Bitcoin has entered a new phase, with funding rates exceeding 10% again. This shift indicates stronger momentum in the short to mid-term, as historically higher funding rates are associated with higher 30-day, 60-day, and 90-day returns, reflecting higher bullish sentiment and demand. However, as funding rates remain elevated, we may deviate from a long-term (1-2 years) phase that is equally favorable for returns. Given the current supportive regulatory environment for Bitcoin, we expect another high-performance period, similar to the post-2020 election period when sustained funding rates above 10% drove a 260% increase over 186 days. With Bitcoin currently trading near $90,000, our $180,000 target price remains feasible, reflecting a potential cycle return of about 1,000% from cycle trough to peak.
Higher 30-day moving average (DMA) relative unrealized profit levels (>0.60 and 0.70) have historically indicated potential price tops for Bitcoin.
BTC average returns compared to 30-day moving average relative unrealized profit (RUP) (November 13, 2016 - November 13, 2024)
Source: Glassnode, as of November 13, 2024
BTC average returns compared to 30-day moving average relative unrealized profit (RUP) (November 13, 2016 - November 13, 2024)
Source: Glassnode, as of November 13, 2024
Next, we focus on Relative Unrealized Profit (RUP), another important indicator used to measure whether the Bitcoin market is overheating. RUP measures the proportion of unrealized gains (i.e., paper profits that have not yet been realized by selling) relative to the total market capitalization of Bitcoin. When Bitcoin prices exceed the last purchase price of most holders, this indicator rises, reflecting more of the market entering a profitable state, thereby reflecting market optimism.
Historically, higher levels of the 30-day moving average (DMA) RUP (especially above 0.60 and 0.70) typically indicate strong market sentiment and potential overheating. As shown in the red ranges in the chart, when RUP 30 DMA exceeds 0.70, it often coincides with market tops, as a higher ratio of unrealized profits triggers more profit-taking. Conversely, when RUP levels fall below 0.60, it indicates more favorable market conditions for long-term buying, with historical data showing higher 1-year and 2-year return rates when purchased below this threshold.
Analysis of the past two market cycles indicates that levels of 30 DMA RUP between 0.60 and 0.70 typically yield the highest short-term to mid-term returns (7 days to 180 days). This range usually reflects the mid-stage of a bull market, during which market optimism is rising but has not yet reached excessive levels. In contrast, when RUP exceeds 0.70, returns across all time frames have consistently shown a negative correlation, reinforcing its role as a strong sell signal.
As of November 13, Bitcoin's 30 DMA RUP is approximately 0.54, but the daily value has exceeded 0.60 since November 11. According to our detailed data, when RUP approaches 0.70, risk gradually increases, emphasizing the importance of short-term trading in the 0.60 to 0.70 range. However, if the 30 DMA of RUP rises close to 0.70, it may indicate a market overheating, and caution should be maintained for long-term positions.
Search popularity of 'cryptocurrency' in the U.S. region
Source: Google Trends, as of November 18, 2024
The popularity of 'cryptocurrency' as a Google search term is an important indicator of retail investor interest and market momentum. Historical data shows that peaks in search popularity are typically closely related to peaks in the total market capitalization of the cryptocurrency market. For example, after reaching historical highs in search popularity in May and November 2021, significant market declines followed: a roughly 55% pullback occurred within about two months after the May peak, while a bear market lasting about 12 months ensued after the November peak, with a total decline of about 75%.
Currently, search popularity is only 34% of the peak in May 2021, slightly below the observed local peak of 37% in March 2024 (when Bitcoin reached the highest price of this cycle). This relatively low search popularity indicates that Bitcoin and the broader crypto market have not yet entered a speculative frenzy phase, leaving room for further growth and not yet reaching the level of mainstream attention typically associated with market tops.
Coinbase app store ranking
Source: openbb.co, as of November 15, 2024
Similar to the search popularity of 'cryptocurrency' on Google, Coinbase's ranking in the app store is also an important indicator of retail investor interest. On March 5 this year, after the price of Bitcoin surged about 34% within 9 days and retested the historical high of about $69,000 from 2021, Coinbase re-entered the top 50 in the app store rankings. Although Bitcoin reached a new high of about $74,000 later in the month, retail interest waned as price volatility decreased to summer lows and public attention shifted to the presidential election. However, the breakthrough of Bitcoin on election night reignited retail interest, with Coinbase's app store ranking jumping from 412th on November 5 to 9th on November 14. The surge in engagement propelled further price increases while setting new records for Bitcoin ETF inflows.
Bitcoin's network activity, adoption, and fees
Daily trading volume: The 7-day moving average of daily trading volume is approximately 543,000 transactions, a decrease of 15% month-on-month. Despite the decline, activity remains strong, at the 96th percentile of Bitcoin's history. Although transaction numbers have decreased, larger transaction loads have offset this impact, as seen in the rising transfer amounts.
Ordinals inscriptions: Daily inscriptions (NFTs and meme coins on the Bitcoin blockchain) increased by 404% month-on-month, reflecting a revival of speculative enthusiasm driven by rising prices and favorable regulatory developments.
Total transfer volume: Bitcoin transfer volume increased by 118% month-on-month, with a 7-day moving average of approximately $85 billion.
Average transaction fees: Bitcoin transaction fees decreased by 5% month-on-month, with an average fee of $3.58 and an average transaction load of about $157,000, resulting in a transaction fee rate of approximately 0.0023%.
Bitcoin market health and profitability
Profitable address ratio: With Bitcoin prices reaching an all-time high, approximately 99% of Bitcoin addresses are currently in profit.
Unrealized net profit/loss: This ratio has increased by 21% over the past month to 0.61, indicating a significant rise in the ratio of relative unrealized profits to unrealized losses. As an indicator of market sentiment, this ratio currently sits in the 'Belief-Denial' range, corresponding to a phase of rapid expansion and contraction between peaks and troughs in the market cycle.
Monthly on-chain dashboard for Bitcoin
Source: Glassnode, VanEck research, as of October 15, 2024
Bitcoin miners and total market capitalization of the crypto market
Mining difficulty (T):
Bitcoin's block difficulty rose from 92 T to 102 T, reflecting that miners are expanding and upgrading their equipment queues. The Bitcoin network automatically adjusts difficulty every 2,016 blocks (approximately two weeks) to ensure that the average block mining time is about 10 minutes. The increase in difficulty indicates heightened competition among miners and also represents a strong and secure network.
Miners' total daily income:
Miners' daily income increased by 30% month-on-month, benefiting from the rise in Bitcoin prices, but Bitcoin-denominated transaction fees decreased by 30%, impacting total revenue.
Volume of miners transferring to exchanges:
On November 18, miners transferred approximately $181 million in Bitcoin to exchanges, equivalent to 50 times the average level over the previous 30 days, pushing the 7-day moving average up by 803%. This extreme fluctuation is the highest level since March, similar levels were also seen before Bitcoin's last halving. Although the sustained high transfer volume of miners to exchanges may indicate market overheating, this peak occurred after a lower summer miner sell-off, indicating that this was profit-taking for operational and growth purposes, rather than a signal of a market top.
Total market capitalization of crypto stocks:
The 30-day moving average of the MarketVector Digital Asset Stock Index (MVDAPP) increased by 47%, outperforming Bitcoin. Major index constituents such as MicroStrategy and Bitcoin mining companies directly benefit from the rise in Bitcoin prices through their held Bitcoin or mining operations. Meanwhile, companies like Coinbase leverage the broader crypto market benefits, as rising prices drive expectations for increased trading fees and other sources of income.
Source: farside.co.uk, as of November 18, 2024
