Original authors: Nathan Frankovitz, Matthew Sigel
Original translation by: Wu Says Blockchain
Fueled by regulatory tailwinds following Trump's election, Bitcoin successfully broke through its historical high. As market attention continues to rise, various key indicators suggest that the strong momentum of this bull market is likely to persist.
As we predicted in September, the price of Bitcoin (BTC) experienced a highly volatile uptrend after the election. Bitcoin has now entered an unknown territory without technical price resistance, and we believe the next stage of the bull market is just beginning. This pattern is similar to the post-2020 election period, where Bitcoin's price doubled before the end of the year and further increased by approximately 137% in 2021. With a significant shift in government support for Bitcoin, investor interest is rapidly increasing. Recently, we have seen a surge in investment inquiries, with many investors realizing their allocations in this asset class are 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 tracked indicators continue to show sustained bullish signals.
Price trends of Bitcoin
Market sentiment
The 7-day moving average (7 DMA) of Bitcoin reached $89,444, setting a new all-time high. On election night, November 5, Bitcoin surged about 9%, reaching a historical high of $75,000. This aligns with our previous observation: as the likelihood of Trump winning increases, the price of Bitcoin tends to rise. Trump explicitly promised to end the SEC's "regulatory by enforcement" strategy during his campaign and to make the U.S. the "world capital of crypto and Bitcoin."
After Trump's election as president, regulatory resistance first turned into a driving force. Trump has begun appointing crypto-supportive officials in the executive branch, and with the Republican Party controlling a united government, the likelihood of related supportive legislation passing has increased. Key proposals include establishing a national Bitcoin reserve plan and rewriting legislation related to crypto market structure and stablecoins, with FIT21 expected to be rewritten in market- and privacy-friendly terms, while the new stablecoin draft will allow state-chartered banks to issue stablecoins without Federal Reserve approval.
As countries like those in BRICS are exploring alternatives such as Bitcoin to bypass dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for dollar export globally. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the U.S. can maintain the global influence of the dollar while utilizing cryptocurrency for faster adoption in emerging markets. There is a strong demand in these markets for financial services, hedging against local currency inflation, and decentralized finance (DeFi).
We anticipate that the SAB will be repealed in the first quarter after Trump takes office, either by the SEC (Securities and Exchange Commission) or Congress, prompting banks to announce cryptocurrency custody solutions. If Gary Gensler has not resigned, Trump may fulfill his promise, replacing the SEC chair with a candidate more supportive of crypto and ending the agency's notorious era of "regulation by enforcement." Furthermore, by 2025, the U.S. Ethereum (ETH) ETF will be revised to support staking, and the SEC will approve the 19b-4 proposal for Solana (SOL) ETF, while creating and redeeming ETFs in physical form will make these products more tax-efficient and liquid. Given that Trump has previously acknowledged the commonality between Bitcoin mining and artificial intelligence (AI) in terms of energy intensity, energy regulations are expected to be relaxed, making base-load energy (such as nuclear) cheaper and more abundant, thus enhancing 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 poised to become a global leader in crypto innovation and employment, transforming cryptocurrency into a key industry for domestic growth and a significant export product for emerging markets.
Bitcoin Dominance
The 7-day moving average of Bitcoin dominance (a measure of Bitcoin's market capitalization relative to the total market capitalization of all cryptocurrencies) rose 2 percentage points to 59% this month, reaching its highest level since March 2021. Although this upward trend, which began from 40% in November 2022, may continue in the short term, it may soon peak. In September, we noted that Harris's victory could enhance Bitcoin's dominance due to a clearer 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 cryptocurrency 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 returns for smaller projects within the asset class.
Regional trading dynamics
At first glance, traders in the Asian market trading session seem to have significantly increased their Bitcoin holdings this month, contrary to the trend in recent years where Asian traders typically net sold while European and American traders net bought. However, the surge in Bitcoin prices on election night occurred during the Asian trading session, 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 entirely to regional dynamics. Consistent with historical behavior, traders in the U.S. and European trading sessions continued to increase their Bitcoin holdings, 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 began with perpetual contracts (perps), where the performance of funding rates provides insights into market sentiment and helps gauge the likelihood of market overheating.
Bitcoin prices typically show signs of overheating when the 30-day moving average funding rates exceed 10% and persist for 1 to 3 months.
Average BTC return rates compared to perpetual financing rates (January 4, 2020 — November 11, 2024)
When the 30 DMA annualized Perps fee exceeds 10%, the performance of BTC price
Source: Glassnode, as of November 12, 2024
Since April 2020, we have analyzed periods when the 30-day moving average perpetual contract funding rates exceeded 10%. The average duration of these periods is about 66 days, with an average return of 17% from opening to closing, although the duration varies significantly across different periods. The only exception was a single-day spike on June 18, 2024, reflecting short-term market sentiment. Other cases generally lasted for several weeks, highlighting structural bullish sentiment, which often leads to significant short- to medium-term gains.
For example, 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 another 51 days on October 19. If this brief interval is included, the total duration of the high funding rate in 2021 reached 99 days. Similarly, the current high funding rate phase that started on November 12, 2024, has lasted for 80 days, followed by a 19-day interval, and then restarted for another 69 days of high funding rates, totaling 168 days, comparable to the 186 days from November 11, 2020, to May 21, 2021. Notably, when purchasing Bitcoin on days when the funding rate exceeds 10%, the average return rates over 30-day, 60-day, and 90-day periods are all higher than on days with lower funding rates.
However, data shows that there is a pattern of underperformance over longer time frames. On average, Bitcoin purchased on days when the funding rate exceeds 10% tends to underperform the market starting from 180 days, and this trend becomes more pronounced over 1-year and 2-year time frames. Since market cycles typically last about 4 years, this pattern suggests that sustained high funding rates are often associated with market tops and may serve as an early signal of market overheating, indicating greater susceptibility to long-term downside risks.
Source: Glassnode, as of November 13, 2024
As of November 11, Bitcoin entered a new phase, with funding rates exceeding 10% again. This shift indicates stronger short- to medium-term momentum, as historically, higher funding rates have been associated with higher 30-day, 60-day, and 90-day return rates, reflecting greater bullish sentiment and demand. However, as funding rates remain high, we may move away from a similarly favorable long-term (1–2 year) return phase. Given the current supportive regulatory environment for Bitcoin, we expect another period of high performance, similar to the aftermath of the 2020 election when sustained funding rates above 10% drove a 260% increase over 186 days. With Bitcoin currently trading near $90,000, our target price of $180,000 remains feasible, reflecting a potential cycle return of approximately 1,000% from the cycle's low to its peak.
Historically, higher 30-day moving average (DMA) levels of relative unrealized profit (above 0.60 and 0.70) typically indicate a top in Bitcoin prices.
Average BTC returns compared to the 30-day moving average relative unrealized profit (RUP) (November 13, 2016 — November 13, 2024)
Source: Glassnode, as of November 13, 2024
Average BTC returns compared to the 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 for measuring whether the Bitcoin market is overheated. RUP measures the proportion of unrealized gains (i.e., paper gains that have not yet been realized through sales) in the total market capitalization of Bitcoin. This indicator rises when the price of Bitcoin exceeds the last purchase price for most holders, reflecting a more profitable market and illustrating market optimism.
Historically, high levels of the 30-day moving average (DMA) RUP (especially exceeding 0.60 and 0.70) typically signal strong market sentiment and potential overheating. As shown in the red range of the chart, when the 30 DMA RUP exceeds 0.70, it often coincides with market tops, as the higher proportion of unrealized profits triggers more profit-taking. Conversely, when RUP levels fall below 0.60, conditions are more favorable for long-term buying, as historical data shows that buying below this threshold yields higher 1-year and 2-year return rates.
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- to medium-term returns (7 days to 180 days). This range usually reflects the mid-stage of a bull market, where market sentiment is rising but has not yet reached excessive levels. In contrast, when RUP exceeds 0.70, return rates across all time frames consistently show negative correlation, reinforcing its role as a strong sell signal.
As of November 13, the 30 DMA RUP of Bitcoin is approximately 0.54, but the daily value has exceeded 0.60 since November 11. According to our detailed data sheet, when RUP approaches 0.70, risk gradually increases, emphasizing the importance of short-term trading within the 0.60 to 0.70 range. However, if the 30 DMA of RUP rises close to 0.70, it may signal an overheated market, and caution should be maintained regarding long-term positions.
Search popularity of "cryptocurrency" in the United States
Source: Google Trends, as of November 18, 2024
"Cryptocurrency" as a Google search keyword's popularity is an important indicator of retail investor interest and market momentum. Historical data shows that peaks in search popularity are usually closely related to peaks in the total market capitalization of the cryptocurrency market. For example, after the search popularity peaks in May and November 2021, there were significant market declines: approximately 55% retracement occurred within about two months after the May peak, while about a 12-month bear market followed the November peak, with a total drop of about 75%.
Currently, search popularity is only 34% of the peak in May 2021, slightly lower than the 37% local peak observed in March 2024 (when Bitcoin reached the highest price of this cycle). This relatively low search popularity indicates that Bitcoin and the broader cryptocurrency market have not yet entered the speculative frenzy stage, leaving room for further growth and not yet reaching the mainstream attention levels 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, the ranking of Coinbase in the app store is also an important indicator of retail investment interest. On March 5 of this year, after Bitcoin's price 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 that month, retail interest waned as price volatility decreased into the summer lull and public attention shifted towards the presidential election. However, the breakout on election night reignited retail interest, causing Coinbase's app store ranking to jump from 412th on November 5 to 9th on November 14. The surge in engagement drove further price increases while setting a new record 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, down 15% month-over-month. Despite the decline, activity remains strong, positioned at the 96th percentile of Bitcoin's history. Although the number of transactions has decreased, larger transaction loads have offset this impact, as evidenced by the increase in transfer amounts.
Ordinals inscriptions: Daily trading volume of inscriptions (NFTs and meme coins on the Bitcoin blockchain) increased by 404% month-over-month, reflecting a resurgence of speculative enthusiasm driven by price increases and favorable regulations.
Total transfer volume: Bitcoin transfer volume increased by 118% month-over-month, with a 7-day moving average of about $85 billion.
Average transaction fees: Bitcoin transaction fees decreased by 5% month-over-month, with an average fee of $3.58 and an average transaction load of about $157,000, resulting in a corresponding transaction fee rate of about 0.0023%.
Health and profitability of the Bitcoin market
Percentage of profitable addresses: As Bitcoin's price reaches an all-time high, approximately 99% of Bitcoin addresses are now in profit.
Unrealized net profit/loss: This ratio increased by 21% over the past month to reach 0.61, showing a significant increase in the ratio of relative unrealized profits to unrealized losses. As an indicator of market sentiment, this ratio is currently in the "Belief-Denial" range, corresponding to a phase of rapid expansion and contraction between peaks and troughs in the market cycle.
Monthly dashboard of Bitcoin on-chain
Source: Glassnode, VanEck Research, as of October 15, 2024
Bitcoin miners vs. total market capitalization of the cryptocurrency 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 the difficulty every 2,016 blocks (about two weeks) to ensure an average block mining time of about 10 minutes. The rise in difficulty indicates increased competition among miners, which also represents a strong and secure network.
Total daily revenue of miners:
Miners' daily income increased by 30% month-over-month, benefiting from rising Bitcoin prices, but transaction fees priced in BTC decreased by 30%, impacting total revenue to some extent.
Volume of miners transferring to exchanges:
On November 18, miners transferred about $181 million worth of Bitcoin to exchanges, equivalent to 50 times the previous 30-day average, pushing the 7-day moving average up 803% month-over-month. This extreme fluctuation is the highest since March and occurred similarly before the last halving of Bitcoin. Although the sustained high transfer volume of Bitcoin to exchanges may indicate an overheated market, this peak follows a period of lower miner sell-offs in the summer, suggesting that it is 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 Assets Stock Index (MVDAPP) rose by 47% month-over-month, outperforming Bitcoin. Major index constituents such as MicroStrategy and Bitcoin mining companies directly benefit from the rise in Bitcoin prices through their Bitcoin holdings or mining operations. Meanwhile, companies like Coinbase benefit from broader crypto market gains, as rising prices drive expectations for increased transaction fees and other revenue sources.
Source: farside.co.uk, as of November 18, 2024
