Original | Odaily Planet Daily (@OdailyChina)
Author｜Nan Zhi (@Assassin_Malvo)
In the previous article (Looking back at the market data of the past four years, which stage of the bull market are we in?), based on the four years of market and market data starting from 2020, we found that the rate, active buying transaction volume, and total transaction volume are effective leading indicators of the market. However, these three indicators gave two completely opposite conclusions. The rate shows that the current market has just entered a slightly FOMO stage from a cooling-off period, but the active buying transaction volume and total transaction volume have hit historical highs, indicating the top of the stage.
The author believes that the divergence in indicator conclusions is mainly due to the popularity of Bitcoin spot ETFs and 'MicroStrategy-style' coin holding, with net inflows of funds outside the 'traditional cryptocurrency circle' driving the continuous rise in Bitcoin prices and trading volumes. On the other hand, its trading is isolated from CEX platforms like Binance and has a completely different leverage form, leading to a disconnection between fees and prices.
Thus, the author aims to explore which stage of the 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 cap and realized value.
The market cap refers to the circulating market cap, while the realized value refers to the total sum of the last moving prices 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. By calculating the total value this way, 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 far from the peaks in the first half of 2021 and the end of 2017.
ahr999 Index
The Bitcoin ahr999 index is a parameter proposed by ahr999 in 2018 to guide coin holding. According to ahr999's statistics for that year, the index was less than 0.45 for 8.5% of the time, defined as the buying zone; 46.3% of the time it was between 0.45 and 1.2, defined as the dollar-cost averaging zone; and 29.3% of the time it was above 1.2, which is the stop-loss waiting zone.
According to Coinglass, the current indicator value is 1.49, relatively close to the high of 1.75 in March this year, but still quite far from the two peaks of 6 and 3.4 in 2021.
PlanB: Bitcoin will rise to $150,000 in December
PlanB and his Stock-to-Flow model (S2F) gained fame during the bull market from 2019 to mid-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. Yesterday, PlanB posted on platform X stating that according to his predictions about Bitcoin's market trends over the next few years released at the end of September, BTC has basically achieved its first two targets: rising to $70,000 in October and $100,000 in November (actually $99,800 but close enough). The next target for BTC is to rise to $150,000 in December.
Rate Cut Cycle
In the article (Summarizing 35 Years of U.S. Interest Rate Cycle Patterns: Can a Rate Cut After 36 Days Trigger the Second Bitcoin Bull Market?), the author summarizes the performance of U.S. stocks and gold during five rate cuts in the past 35 years, concluding that whether or not to cut rates is not the fundamental cause of 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 growth or in response to a black swan event, from the perspective of U.S. stocks, it is a struggle between economic resilience and liquidity pricing.
To compare it to the past, the current situation is closest to the interest rate cut cycle of 1989, when the U.S. experienced seven years of expansion and faced high inflation in 88-89, responding with extremely high interest rates that peaked near 10%. The U.S. then began a sustained rate cut from 9.75% on February 24, 1989, to 3.00% on September 4, 1992.
According to the dot plot released in September, the Federal Reserve's interest rates are expected to drop about 2% from the current 4.75% within two years. How has the market performed historically after rate cuts? It can be divided into two phases: 1989 and 1995. During the first three years of the rate cut cycle, U.S. stocks continued to fluctuate, stopping the cuts in 1992 and maintaining for two years, and after a brief preventive rate hike in 1994, no significant rate adjustments were made, leading to a continuous bull market in U.S. stocks. Therefore, from a macro fundamental perspective, we are still in the early to mid-term.
Other Classic Indicators
Fear and Greed Index
The greed index today is 76, down from its peak, with the recent high being 94 on November 22, when the Bitcoin price was $95,829. This greed value exceeds those of November 2021 and March 2024, matching the peak value of 95 from February 2021.
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 2021 peak, the Bitcoin price was about four times the 200-week average, while currently it is about twice that (96,500:41,500), still at a relatively low point.
