Written by: Nan Zhi (@Assassin_Malvo)
In the previous article (Reviewing the market data over the past four years, which stage of the bull market are we in?), based on the market and行情 data starting from 2020, we found that the rate, active buy transaction volume, and total transaction volume are effective leading indicators. However, these three indicators gave two completely opposite conclusions. The fee indicates that the current market has just entered a slight FOMO stage from a calm period, while the active buy transaction volume and total transaction volume have already reached historical highs, indicating a stage peak.
The author believes that the divergence in indicator conclusions is mainly due to the rise of Bitcoin spot ETFs and the prevalence of 'MicroStrategy-style' hoarding. The inflow of funds outside the 'traditional crypto circle' has driven up Bitcoin prices and trading volumes. On the other hand, their trading is isolated from CEXs like Binance, and the forms of leverage are completely different, leading to a disconnect between rates and prices.
Therefore, the author aims to explore which stage of the ultimate bull market we are in through other more universal, intuitive, and historically older indicators.
MVRV-Z Score
MVRV (Market Value to Realized Value ratio) is an algorithm used to assess whether the market is overvalued or undervalued by comparing the current market value of Bitcoin to its realized value.
Market capitalization refers to the circulating market value, while realized value refers to the cumulative last transfer price of each Bitcoin. For example, if 100,000 Bitcoins were transferred three years ago at a price of $65,000, it would be recorded as 100,000 × $65,000, and so forth to calculate the total value. Dividing market value by realized value gives the MVRV.
The algorithm for the MVRV-Z score is (Circulating Market Value - Realized Value) ÷ Circulating Market Value Standard Deviation. This method excludes short-term price noise and is more suitable for capturing extreme market sentiments.
According to Coinglass, the current value of MVRV-Z is 3.2, close to the peak of November 2021, but still quite far from the first half of 2021 and the end of 2017.
ahr 999 index
The Bitcoin ahr 999 index is a parameter proposed by ahr 999 in 2018 to guide coin hoarding. According to ahr 999's statistics for that year, 8.5% of the time the index was below 0.45, defined as the bottom buying range; 46.3% of the time was between 0.45 and 1.2, defined as the dollar-cost averaging range; and 29.3% of the time was above 1.2, which is defined as the stop-investing waiting range.
According to Coinglass, the current indicator value is 1.49, relatively close to this year's peak of 1.75, 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) achieved fame during the bull market from 2019 to the first half of 2021 due to its successful prediction of Bitcoin reaching $55,000 at the beginning of 2021, but it deviated in the second half of 2021 and completely failed in 2022.
As Bitcoin leads the entire market again, PlanB begins to return to the market. Yesterday, PlanB posted on platform X, stating that according to his speculation about Bitcoin's market trends for the next few years released at the end of September, BTC has basically achieved the first two targets, namely rising to $70,000 in October and to $100,000 in November (actually $99,800, but close enough). The next target for BTC is to rise to $150,000 in December.
Interest rate cut cycle
In the article (Summarizing the patterns of 35 years of U.S. interest rate cycles, can a rate cut after 36 days trigger the second round of Bitcoin bull market?), the author summarizes the performance of U.S. stocks and gold during the five interest rate cuts in the past 35 years, concluding that whether or not rates are cut is not the fundamental reason for market fluctuations. The impact of rate cuts on future markets depends on the overall economic situation at the time, whether it is an active cut to promote economic growth or a forced cut due to a black swan event. From the perspective of U.S. stocks, it is a tug-of-war between economic resilience and liquidity easing pricing.
To make a comparison akin to carving a boat to seek a sword, the current closest comparison is the interest rate cut cycle of 1989, during which the United States experienced seven years of expansion and faced high inflation pressures in 1988-1989. It responded to inflation with extremely high interest rates, peaking near 10%. In the following three years, the U.S. began a series of interest rate cuts, 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 rate is expected to drop from the current 4.75% to around 2% within two years. Historically, how have markets performed after interest rate cuts? They can be divided into two phases: 1989 and 1995. During the first three years of the interest rate cut cycle, U.S. stocks experienced continuous fluctuations. The Fed stopped cutting rates in 1992 and maintained the rate for two years, and after a brief preventive rate hike in 1994, it didn't make major adjustments, thus beginning a continuous bull market for U.S. stocks. Therefore, from a macroeconomic perspective, we are still in the early to mid-stage.
Other classic indicators
Fear and Greed Index
The current Greed Index is 76, which has decreased from its peak, with the recent peak being 94 on November 22, when Bitcoin's price was $95,829. This Greed value exceeds those of November 2021 and March 2024, being at the same level as the peak value of 95 in February 2021.
200-week moving average
Historically, Bitcoin's price usually bottoms near the 200-week moving average, while significant deviations from this average signal a peak. At the peak in 2021, Bitcoin's price was about four times the 200-week average, while currently it is about twice (96500: 41500), still at a relatively low point.
