Written by: Nathan Frankovitz, Matthew Sigel

Compiled by: Wu Says Blockchain

With regulatory benefits driven by Trump's election, Bitcoin successfully broke through historical highs. As market attention continues to rise, a variety of key indicators suggest that the strong momentum of this bull market is likely to persist.

As we predicted in September, Bitcoin (BTC) prices experienced high volatility and a surge after the elections. Now, Bitcoin enters unexplored territory without technical price resistance, and we believe the next phase of the bull market is just beginning. This pattern is similar to the post-election period in 2020, where Bitcoin prices doubled by the end of the year and further rose by about 137% in 2021. With the 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 they are significantly underallocated in this asset class. 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 are showing sustained bullish signals.

Price trends of Bitcoin

Market sentiment

Bitcoin's 7-day moving average (7 DMA) reached $89,444, setting a new historical high. On election night, Tuesday, November 5, Bitcoin surged about 9%, reaching an all-time high of $75,000. This aligns with our previous observations: when the probability of Trump's victory increases, the price of Bitcoin rises. Trump explicitly promised during his campaign to end the SEC's 'enforcement-based' regulatory strategy and to make the U.S. the 'world capital of crypto and Bitcoin.'

After Trump's election as president, regulatory resistance turned into momentum for crypto. Trump has begun appointing crypto-friendly officials in the executive branch, and the Republican Party holds a united government, increasing the likelihood of supportive legislation passing. Key proposals include plans to establish a national Bitcoin reserve and rewriting relevant legislation on crypto market structure and stablecoins, with expectations that FIT21 will be rewritten with market- and privacy-friendly terms, while new stablecoin proposals will allow state-chartered banks to issue stablecoins without Federal Reserve approval.

As countries like the BRICS nations explore alternatives like Bitcoin to bypass dollar sanctions and currency manipulation, stablecoins offer strategic opportunities for dollar export worldwide. 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 cryptocurrencies in emerging markets. These markets have a strong demand for financial services, hedging against local currency inflation, and decentralized finance (DeFi).

We expect the SAB to be repealed in the first quarter of Trump's administration, either by the SEC or Congress, which will prompt banks to announce cryptocurrency custody solutions. If Gary Gensler has not resigned, Trump may fulfill his promise to replace the SEC chair with a candidate more supportive of crypto, ending the agency's infamous era of 'regulating 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 creating and redeeming ETFs in physical form will make these products more tax-efficient and liquid. Given that Trump previously acknowledged the commonalities between Bitcoin mining and artificial intelligence (AI) in terms of energy intensity, regulatory easing on energy is expected, prompting base-load energy (like nuclear) to become cheaper and more abundant, thereby reinforcing the U.S.'s global leadership in energy, AI, and Bitcoin.

This election marks a bullish turning point, reversing the capital and job outflow 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 an important 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) increased by 2 percentage points this month to 59%, reaching the highest level since March 2021. While this upward trend that started from 40% in November 2022 may continue in the short term, it could soon peak. In September, we pointed out that a Harris victory might enhance Bitcoin's dominance due to more defined regulatory status as a commodity. In contrast, Trump's supportive stance on crypto and his expanded cabinet could drive broader investment 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, consequently boosting returns for smaller projects within the asset class.

Regional trading dynamics

At first glance, it seems that traders in the Asian market trading hours have significantly increased their Bitcoin holdings this month, which contrasts with the trend in recent years where Asian traders typically net sell while European and U.S. traders net buy. However, the surge in Bitcoin prices on election night occurred during Asian trading hours, likely due to a large number of U.S. investors trading around the election. This peculiar 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 hours continue 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 gauge the likelihood of market overheating.

The price of Bitcoin typically shows signs of overheating when the 30-day moving average perpetual funding rates exceeds 10% and continues for 1 to 3 months.

BTC average return compared to perpetual funding 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 funding rates exceeded 10%. The average duration of these periods was about 66 days, with an average return of 17% from opening to closing, although the duration varied significantly across different periods. The only exception was a single-day spike on June 18, 2024, reflecting short-term market sentiment. Other instances lasted several weeks, highlighting structural bullish sentiment, which typically leads to significant short- to medium-term gains.

For instance, the high funding rate phase that began on August 31, 2021, lasted 23 days, followed by a 28-day cooling-off period, and then lasted another 51 days starting 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 that began on November 12, 2024, has lasted 80 days, followed by a 19-day interval, and has restarted a high funding rate period lasting 69 days, totaling 168 days, comparable to the 186 days from November 11, 2020, to May 21, 2021. Notably, when purchasing Bitcoin on days when funding rates exceeded 10%, the average return over 30-day, 60-day, and 90-day time frames consistently outperformed days with lower funding rates.

However, data shows that there are patterns of underperformance over longer time frames. On average, Bitcoin purchased on days when funding rates exceeded 10% tends to underperform the market starting from 180 days, with this trend becoming more pronounced over 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 higher susceptibility to long-term downside risk.

Source: Glassnode, as of November 13, 2024

As of November 11, Bitcoin entered a new phase where funding rates once again exceeded 10%. This shift indicates stronger short- to medium-term momentum, as historically higher funding rates correlate with higher 30-day, 60-day, and 90-day returns, reflecting increased bullish sentiment and demand. However, as funding rates remain elevated, we may move away from a phase where long-term (1-2 years) returns are equally favorable. Given the current supportive regulatory environment for Bitcoin, we anticipate 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's current trading price approaching $90,000, our target price of $180,000 remains feasible, reflecting a potential cycle return of about 1,000% from the cycle low to high.

Higher 30-day moving average (DMA) relative to unrealized profit levels (>0.60 and 0.70) has historically indicated a top in Bitcoin prices.

BTC average return 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 return 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 for measuring whether the Bitcoin market is overheating. RUP measures the proportion of unrealized gains (i.e., paper profits that have not yet been realized through sales) in the total market capitalization of Bitcoin. This indicator rises when Bitcoin prices exceed the last purchase price of most holders, reflecting more of the market entering a profitable state, thereby indicating market optimism.

Historically, higher 30-day moving average (DMA) RUP levels (especially above 0.60 and 0.70) typically signal strong market sentiment and potential overheating. As shown in the red zones in the chart, when RUP 30 DMA exceeds 0.70, it often coincides with market tops, as a higher proportion 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 that buying below this threshold yields higher 1-year and 2-year returns.

Analysis of the last 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 optimism is rising but has not yet reached excessive levels. In contrast, when RUP exceeds 0.70, returns across all time frames consistently show a 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, risks gradually increase as RUP approaches 0.70, 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 indicate market overheating, and caution should be exercised 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. Historically, peaks in search popularity have closely correlated with peaks in the total market capitalization of the cryptocurrency market. For example, after the peaks in search popularity in May and November 2021, significant market declines occurred: a drop of about 55% over approximately two months after the May peak, and an approximate 75% total decline over about 12 months after the November peak.

Currently, search popularity is only 34% of the peak in May 2021, slightly below the local peak of 37% observed in March 2024 (when Bitcoin reached its 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 stage, leaving room for further growth and not yet reaching the levels of mainstream attention typically associated with market tops.

Coinbase app store ranking

Source: openbb.co, as of November 15, 2024

Similar to Google's search popularity of 'cryptocurrency,' Coinbase's ranking in app stores is also an important metric for measuring retail investor interest. On March 5 of this year, after Bitcoin prices surged approximately 34% within 9 days and retested the historical highs of about $69,000 from 2021, Coinbase re-entered the top 50 app store rankings. Although Bitcoin reached a new high of around $74,000 later in the month, retail interest waned as price volatility declined to summer lows and public attention shifted towards the presidential election. However, the breakout 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 participation drove 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, down 15% month-over-month. Despite the decline, activity remains strong, at the 96th percentile level in 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 inscriptions (NFTs and meme coins on the Bitcoin blockchain) increased by 404% month-over-month, reflecting a revival of speculative enthusiasm fueled by rising prices and favorable regulatory news.

Total transaction volume: Bitcoin transaction volume increased by 118% month-over-month, with a 7-day moving average around $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 approximately 0.0023%.

Health and profitability of the Bitcoin market

Profitable address ratio: As Bitcoin prices reached an all-time high, currently about 99% of Bitcoin addresses are in profit.

Unrealized net profit/loss: This ratio has increased by 21% in the past month to 0.61, showing a significant increase in the ratio between relative unrealized profits and unrealized losses. As an indicator of market sentiment, this ratio is currently in the 'Belief-Denial' range, corresponding to the phase of rapid expansion and contraction between peaks and troughs in market cycles.

Bitcoin on-chain monthly dashboard

Source: Glassnode, VanEck Research, as of October 15, 2024

Bitcoin miners and total market capitalization of the crypto market

Mining difficulty (T):

The mining difficulty of Bitcoin increased from 92 T to 102 T, reflecting that miners are expanding and upgrading their equipment fleets. The Bitcoin network automatically adjusts difficulty every 2,016 blocks (approximately two weeks) to ensure an average block mining time of about 10 minutes. The rising difficulty indicates intensified competition among miners and represents a strong and secure network.

Total daily revenue of miners:

Miners' daily revenue increased by 30% month-over-month, benefiting from the rise in Bitcoin prices, but transaction fees denominated in BTC decreased by 30%, impacting total revenue.

Volume of miners transferring to exchanges:

On November 18, miners transferred approximately $181 million worth of Bitcoin to exchanges, equivalent to 50 times the previous 30-day average, driving a month-over-month increase of 803% in the 7-day moving average. This extreme fluctuation marks the highest level since March, with similar levels appearing before Bitcoin's last halving. While the sustained high transfer volume from miners to exchanges may indicate market overheating, this peak occurred after lower summer sell-offs by miners, suggesting that this is 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 Assets Equity Index (MVDAPP) increased by 47% month-over-month, outperforming Bitcoin. Major index constituents like MicroStrategy and Bitcoin mining companies directly benefit from the rise in Bitcoin prices through their holdings or mining operations. Meanwhile, companies like Coinbase leverage broader crypto market gains as rising prices fuel expectations of increased trading fees and other revenue sources.

Source: farside.co.uk, as of November 18, 2024