Authors | Nathan Frankovitz, Matthew Sigel
Compiled by | Wu Says Blockchain
Original link:
https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-vaneck-mid-november-bitcoin-chaincheck/
Under the regulatory advantages brought by Trump's election, Bitcoin successfully broke through historical highs. As market attention continues to rise, various key indicators suggest that the strong momentum of this bull market is expected to persist.
As we predicted in September, Bitcoin (BTC) prices have experienced high volatility and a rise after the election. Bitcoin is now in uncharted territory without technical price resistance, and we believe the next phase of the bull market has just begun. This pattern is similar to after the 2020 election, where Bitcoin's price doubled before the end of the year and further increased by about 137% in 2021. With the government's significant shift in support for Bitcoin, investor interest is rapidly increasing. Recently, we have seen a surge in investment inquiries, with many investors realizing their allocation in this asset class is notably insufficient. 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 show continued bullish signals.
Bitcoin Price Trends
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% to reach a historical high of $75,000. This aligns with our previous observations: Bitcoin prices tend to rise when the likelihood of a Trump victory increases. Trump explicitly promised to end the SEC's 'regulatory enforcement' strategy and to make the U.S. the 'world capital of crypto and Bitcoin.'
After Trump's election as president, regulatory resistance shifted to momentum for the first time. Trump has begun appointing pro-crypto officials in the executive branch, and with the Republican Party holding a unified government, the likelihood of related supportive legislation passing has increased. Key proposals include establishing a national Bitcoin reserve plan and rewriting relevant legislation on crypto market structures and stablecoins, with FIT21 expected to be rewritten with market- and privacy-friendly terms, while new stablecoin drafts will allow state-chartered banks to issue stablecoins without Federal Reserve approval.
As countries like BRICS are exploring alternatives like Bitcoin to bypass dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for the dollar to be exported globally. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the U.S. can maintain the global influence of the dollar and take advantage of the faster adoption of cryptocurrencies in emerging markets. These markets have a strong demand for financial services, hedging local currency inflation, and decentralized finance (DeFi).
We expect the SAB to be repealed in the first quarter after Trump's inauguration, either by the SEC or Congress, prompting banks to announce cryptocurrency custody solutions. If Gary Gensler has not resigned, Trump may fulfill his promise to replace the SEC chairman with a candidate who is more supportive of crypto and end the agency's notorious 'regulation by enforcement' era. Furthermore, by 2025, U.S. Ethereum (ETH) ETFs will be revised to support staking, and the SEC will approve Solana (SOL) ETF's 19b-4 proposal, while creating and redeeming ETFs in physical form will make these products more tax-efficient and liquid. Given that Trump has previously acknowledged the commonalities between Bitcoin mining and artificial intelligence (AI) in terms of energy intensity, energy regulation is expected to loosen, facilitating cheaper and more abundant base-load energy sources (like nuclear power), thereby boosting 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 expected to become a leader in global crypto innovation and employment, transforming cryptocurrency into a key domestic growth industry 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) rose 2 percentage points this month to 59%, reaching its highest level since March 2021. Although this upward trend, which began at 40% in November 2022, may continue in the short term, it may soon reach a peak. In September, we noted that a Harris victory could enhance Bitcoin's dominance due to a clearer regulatory status as a commodity. In contrast, Trump's pro-crypto stance and his expanded cabinet team could drive broader crypto market investment. With Bitcoin reaching 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 the returns of smaller projects within the asset class.
Regional Trading Dynamics
At first glance, traders in the Asian market trading hours seem to have significantly increased their Bitcoin holdings this month, contrasting with the trend in recent years where Asian traders typically net sold while European and U.S. traders net bought. 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 elections. This unique event makes it difficult to attribute such price fluctuations solely to regional dynamics. Consistent with historical behavior, traders during U.S. and European trading hours continue to increase their Bitcoin holdings, maintaining the price performance trend observed in October.
Source: Glassnode, as of 11/18/24 (past performance does not guarantee future results.)
Key Indicators
To assess the potential upside space 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 (30 DMA Perp Funding Rates) exceed 10% and persist for 1 to 3 months.
BTC Average Return Rate Compared to Perpetual Funding Rates (January 4, 2020 — November 11, 2024)
When the 30 DMA annualized Perps fees exceed 10%, BTC price performance
Source: Glassnode, as of November 12, 2024
From April 2020, we analyzed periods when the 30-day moving average perpetual contract funding rates exceeded 10%. The average duration of these periods was around 66 days, with an average return of 17% from opening to closing, although the durations varied significantly across periods. The only exception was the single-day spike on June 18, 2024, reflecting short-term market sentiment. Other instances lasted several weeks, highlighting structural bullish sentiment that often brings 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 51 days 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 starting on November 12, 2024, has lasted for 80 days, followed by a 19-day interval, and has resumed 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 funding rates exceeded 10%, the average return rates across 30-day, 60-day, and 90-day timeframes were higher than on days with lower funding rates.
However, the data shows a pattern of underperformance over longer timeframes. On average, Bitcoin purchased on days when funding rates exceeded 10% tends to underperform the market starting from 180 days, and this trend becomes more pronounced over 1 and 2-year timeframes. Given that 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 early signals of market overheating, indicating a higher susceptibility to long-term downside risks.
Bitcoin Cycle Analysis
Source: Glassnode, as of November 13, 2024
As of November 11, Bitcoin has entered a new phase where funding rates exceed 10% again. 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 high, we may depart from a long-term (1–2 years) favorable return phase. Given the current supportive regulatory environment for Bitcoin, we expect another high-performance period similar to post the 2020 election, when sustained funding rates above 10% drove a 260% increase over 186 days. With Bitcoin's current trading price nearing $90,000, our target price of $180,000 remains feasible, reflecting a potential cycle return of approximately 1,000% from the cycle trough to peak.
Higher 30-day moving average (DMA) relative unrealized profit levels (>0.60 and 0.70) have historically indicated the top of Bitcoin prices.
BTC Average Returns 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 Returns 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 overheated. RUP measures the proportion of unrealized gains (i.e., paper profits that have not yet been realized through sales) in Bitcoin's total market capitalization. When Bitcoin prices exceed the last purchase prices of most holders, this indicator rises, reflecting more market participants entering into profit, thus reflecting market optimism.
Historically, high levels of 30-day moving average (DMA) RUP, especially exceeding 0.60 and 0.70, typically indicate strong market sentiment and potential overheating. As shown in the red areas of the chart, when RUP 30 DMA exceeds 0.70, it often aligns with market tops, as the high 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 higher 1-year and 2-year returns for purchases made below this threshold.
Analysis of the past two market cycles indicates that 30 DMA RUP levels 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 timeframes consistently show negative correlation, reinforcing its role as a strong sell signal.
As of November 13, Bitcoin's 30 DMA RUP was approximately 0.54, but daily values have exceeded 0.60 since November 11. According to our detailed data table, risk gradually increases 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 one should remain cautious regarding long-term positions.
U.S. Regional Search Interest in 'Cryptocurrency'
Source: Google Trends, as of November 18, 2024
"Cryptocurrency" as a Google search term's heat is an important indicator of retail investor interest and market momentum. Historical data show that peaks in search interest are often closely related to peaks in the total market capitalization of cryptocurrencies. For example, after the search interest peaks in May and November 2021, significant market declines occurred: a drop of about 55% within two months following the May peak, and an approximately 75% total decline during the bear market following the November peak lasting about 12 months.
Currently, search interest is only 34% of the peak in May 2021, slightly lower than the 37% observed in March 2024 (when Bitcoin reached its highest price in this cycle). This relatively low search interest indicates that Bitcoin and the broader crypto market have not yet entered a speculative frenzy phase, leaving room for further growth without 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 interest for 'cryptocurrency' on Google, Coinbase's ranking in app stores is also an important indicator of retail investor interest. On March 5 this year, after Bitcoin's price soared about 34% in 9 days and retested the historical high of around $69,000 from 2021, Coinbase re-entered the top 50 in app store rankings. Although Bitcoin reached a new high of about $74,000 later that month, retail interest waned as price volatility decreased during the summer lull and public attention shifted to 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 Network Activity, Adoption, and Fees
Daily Trading Volume: The 7-day moving average of daily trading volume is approximately 543,000 transactions, a decrease of 15% month-on-month. Despite the decline, activity remains strong, 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 inscription (NFTs and meme coins on the Bitcoin blockchain) transaction volume increased by 404% month-on-month, reflecting a resurgence of speculative enthusiasm driven by rising prices and favorable regulations.
Total Transfer Volume: Bitcoin transfer volume increased by 118% month-on-month, with the 7-day moving average reaching approximately $85 billion.
Average Transaction Fees: Bitcoin transaction fees decreased by 5% month-on-month, with an average fee of $3.58 and an average transaction load of approximately $157,000, resulting in a corresponding transaction fee rate of about 0.0023%.
Bitcoin Market Health and Profitability
Profitable Address Ratio: As Bitcoin prices reach historical highs, approximately 99% of Bitcoin addresses are in profit.
Unrealized Net Profit/Loss: This ratio has increased by 21% over the past month, reaching 0.61, indicating a significant rise 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 the rapid expansion and contraction phase between peaks and troughs in the market cycle.
Bitcoin On-Chain Monthly Dashboard
Source: Glassnode, VanEck Research, as of October 15, 2024
Bitcoin Miners and Total Market Capitalization of Crypto
Mining Difficulty (T):
Bitcoin's block difficulty 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 every two weeks) to ensure an average block time of around 10 minutes. The increase in difficulty indicates heightened competition among miners, as well as a strong and secure network.
Miners' Daily Total Revenue:
Miners' daily income increased by 30% month-on-month, benefiting from rising Bitcoin prices, but transaction fees in BTC decreased by 30%, affecting total revenue somewhat.
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, pushing the 7-day moving average up 803%. This extreme fluctuation is the highest level since March, and a similar level was seen just before Bitcoin's last halving. Although the sustained high transfer volume from miners to exchanges may indicate market overheating, this peak occurred after a lower summer miner sell-off, suggesting 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) has increased by 47%, outperforming Bitcoin. Major index constituents such as MicroStrategy and Bitcoin mining companies directly benefit from the rise in Bitcoin prices through their holdings or mining operations. Companies like Coinbase benefit from broader cryptocurrency market gains as rising prices drive expectations for increased trading fees and other revenue sources.
Source farside.co.uk, as of November 18, 2024
