Before the analysis, we first need to introduce a new data concept - Active Investor Value Deviation, or AVIV (note! AV here is not a short film, but Active Value); it is a set of analysis models newly designed and created by Glassnode engineers, and its design principle is similar to the famous MVRV. Given that active investors are more representative of the supply area of ​​the market, AVIV compares market value with active investor value.

The calculation scope of MVRV covers all the chips on the chain. If the extremely low-cost BTC in the early stage is included, the average holding cost will inevitably be lowered. However, AVIV only targets the chips of active investors in the algorithm, eliminating the long-term dormant or lost parts; and when the total capital inflow into the market is included, the part paid to miners is deducted from the general cost. Therefore, AVIV is closer to "fair value" and truly reflects the scale of floating profit/loss of BTC held in the market.

Undoubtedly, the creator of AVIV must be an incredibly intelligent expert! However, after reading their analysis and explanation, I found that it did not fully interpret the core function and powerful capability of this data; I can only say, 'I am a genius, but may not know how to teach'...

Therefore, I would like to explain the application method and underlying logic of this great design in my own way based on relevant data research experience.

🚩 I. Large Cycle Deviation

The following Figure 1 shows AVIV data, with the blue line at the top representing the average holding cost of active investors (i.e., the market fair price); the orange wavy line below is the AVIV value.

Everyone pay attention, the green and red dotted lines I marked in the chart indicate that in each cycle, BTC's price is getting higher, but AVIV is getting lower, which means that AVIV has been following the pattern of large-level cycle deviation for the past ten years, i.e., the peak value of AVIV in this cycle will not exceed the peak of the previous cycle.

(Figure 1)

In addition to large-level deviations, there are also intermediate-level deviations within the same cycle, meaning that the high points after AVIV will be limited by the previous high points. For example, the second peak AVIV in the 2021-2022 cycle is 1.95, which is lower than the previous high of 2.67; this high point is also lower than the peak value of AVIV 3.1 in the 2017-2018 cycle.

The logic behind this is that the turnover cost for all active investors is getting higher, and the unrealized profits that the market can create will become lower. Because of the existence of this 'large cycle deviation' phenomenon, we can foresee that in the future: BTC's price increase during a bull market will become smaller, while the bottom of a bear market will become higher. In other words, we may never see the bottom of the last cycle at $16,000 for Bitcoin again. If BTC is to maintain its previous high growth rates in the future, the inflowing capital scale must grow exponentially; otherwise, it will be difficult to break the pattern of deviation. The first peak of this cycle occurred in March this year: AVIV 1.88; it can be seen that it did not exceed the previous peaks of 1.95 and 2.67; AVIV 1.88/1.95/2.67 corresponds to the current BTC prices of $105,000, $109,000, and $149,000 respectively. According to the above logic, it means that in this trend, when BTC approaches $105,000, it will be suppressed by 'intermediate-level' deviations. After breaking this barrier, when approaching $109,000 and $149,000, it will be restricted by larger-level deviations. The essence of this restriction is the internal game relationship between 'cost increase' and 'capital inflow'. Even if BTC in the future is as vast as the stars and the sea, this last barrier (i.e., $149,000) is a pattern that has lasted for ten years and is not easily broken. (Note: The calculated price will change over time.)

🚩 II. Limit Deviation Calculation

Using AVIV data to calculate the price deviation limits during the cycle requires the probability of standard deviation in statistics. The standard deviation reflects the degree of deviation of data points from their mean; the larger the standard deviation, the more dispersed the data distribution; the smaller the standard deviation, the more concentrated the data distribution.

(Figure 2)

We set two limit deviation areas for the historical average of AVIV: +2SD (the red line in Figure 2) and +3SD (the purple line in Figure 2). According to the empirical method of normal distribution (three-sigma rule), 95% of data points will fall within the range of 2 standard deviations (+2SD), and 99.7% of data points will fall within the range of 3 standard deviations (+3SD).

From Figure 2, we can see that in February 2021, the AVIV value could temporarily exceed the purple line (+3SD), when the average cost of active investors was $21,500. By October 2021, it was even difficult for AVIV to exceed the red line (+2SD), as the average cost had risen to $36,000. As the average cost increases, the limit deviation value of AVIV becomes more difficult to exceed the +2SD range.

The current +2SD is 2.05, corresponding to a BTC price of $114,000; this means there is a 95% probability that BTC's price will fall within this range during this cycle. +3SD is 2.49, corresponding to a BTC price of $139,000; this means there is a 99.7% probability that it will fall within this range.

🔹 Summary

Combining the aforementioned cycle deviation logic, BTC is currently subject to three price standard lines, namely $105,000, $109,000, and $149,000; among them, $105,000 and $109,000 are just within the limit deviation range of +2SD, so there is a certain probability of reaching them. However, there was a pullback when approaching $105,000 yesterday.

However, $149,000 has already fallen outside the +3SD limit deviation range, meaning the probability of reaching this target is only 0.3%. This is a very low-probability event, requiring exponential incremental capital to enter the market, completely covering the overall cost rise in the market. Therefore, from this data indicator, the price limit for BTC in this cycle is around $120,000, which is currently a reasonable assessment standard. At the same time, the price-sensitive price line mentioned in the text can also serve as a reference mark for measuring the upper range.

The above is not investment advice! It is for data analysis and research only! #比特币走势分析