With multiple Bitcoin ETFs being launched, the Federal Reserve's monetary policy shifting to ease, and continuous political support for cryptocurrencies in the U.S., Bitcoin has made a strong comeback in 2024, becoming one of the best-performing assets of the year, with this year's increase standing out.
Now entering 2025, the market is starting to focus on 'how far this bull market can go.' Favorable conditions in the overall environment include: rapid growth of ETF scale, Bitcoin prices once reaching the milestone of 100,000, and Donald Trump being re-elected president, leading digital asset policies in a positive direction. The influx of hot money from Wall Street has made Bitcoin an important choice for asset allocation.
The bull market is definitely still on, and prices will certainly rise, but when to cash out at the peak?
Looking at market data for short-term and long-term trends
Exchange Balances / Net Flows
Currently, about 2.5 million bitcoins are held on major centralized exchanges, accounting for approximately 12.6% of the total circulation, which is a significant decrease from 3 million at the beginning of the year. The decrease in balance indicates that more holders are transferring bitcoins to personal wallets, showing an increased willingness to hold long-term and a relative reduction in selling pressure. If a bull market approaches its peak later, we may see exchange balances increase again as investors return their coins to exchanges to prepare for cashing out at high points. Observing the trend of this indicator can help assess selling pressure and market sentiment.
MVRV Z-Score
MVRV Z-Score is commonly used to identify whether Bitcoin is overvalued or undervalued. It compares the gap between market value and realized value; the higher the value, the more likely the price is overheated. Historical experience shows that a Z-Score exceeding 6 to 7 often indicates that the market is nearing its peak. Currently, this score is still below 3, indicating that it has not yet reached a frenzy, and there is still room for the market to continue rising. However, if the Z-Score begins to surge, investors should be particularly cautious of potential high-level risks.
1+ Year HODL Wave
This indicator assesses the proportion of holders who have held their coins for at least a year to judge the movements of long-term holders versus short-term speculators. When a bull market nears its end, the 1+ year HODL will significantly decrease, meaning that seasoned players are selling their bitcoins to new retail investors, creating what is known as a 'newbie takeover.' Although there are slight sell-offs from long-term holders now, this fluctuation is still less than previous historical peaks, indicating that we have not yet reached a large-scale turnover stage.
Google Search Trends
Although it is not on-chain data, Google Search remains a key indicator for observing retail investor sentiment. Historically, when Bitcoin prices hit new highs, Google search volumes have surged significantly. The report mentions that although Bitcoin previously surged to $100,000, Google search interest only reached about 38% of the peak level in 2021. This indicates that mainstream retail investors have not yet 'flooded in' as before, suggesting that the market may still be in the middle stage, waiting for enthusiasm to build before approaching the peak.
Cautiously optimistic, do not blindly chase highs
Although Bitcoin has performed brilliantly this year, changes in ETF progress and the overall economic landscape may occur:
Firstly, if the Federal Reserve's policy direction reverses or if geopolitical events create black swans, the Bitcoin bull market may slow down or even turn.
Secondly, the Trump administration has become more favorable towards digital assets, but the details of legislation and regulation remain to be seen.
In addition, even if the bull market continues, market volatility will remain high. New investors need to remember to set profit-taking and risk management.
Understanding deeply and observing changes in a timely manner will help investors respond rationally to potential upcoming market movements. After all, although Bitcoin enjoys the title of 'digital gold,' it always carries high risks. Whether one can seize opportunities and smile at the next wave of rises depends on their grasp of market trends. I hope everyone can reap great rewards in the new year.