ETF progress and the overall environment
With multiple Bitcoin ETFs emerging, the Federal Reserve's monetary policy turning towards easing, and U.S. political winds continuing to support cryptocurrencies, Bitcoin has strongly re-emerged in 2024, becoming one of the best-performing assets of the year. Compared to the S&P 500 (+26%), NASDAQ (+33%), and gold (+28%), Bitcoin (+126%) has shown an impressive rise this year.
Now entering 2025, the market begins to focus on 'how far this bull market can go,' with overall favorable conditions: ETF scales soaring, Bitcoin prices previously reaching the 100,000 milestone, and Donald Trump being re-elected as president, leading the digital asset policy towards a positive direction. Wall Street's hot money influx has made Bitcoin an important choice for asset allocation. However, before enjoying the market, Forbes emphasizes that the '5 key indicators' will become tools for investors to judge trends.
5 major indicators breakdown: Analyzing short- and long-term trends from market data
1. Exchange Balances / Net Flows
The Forbes report indicates that currently about 2.5 million Bitcoins are held on major centralized exchanges, accounting for approximately 12.6% of the total circulating supply, which is a significant decrease from 3 million coins at the beginning of the year. A reduction in balances indicates that more holders are transferring Bitcoin to personal wallets, showing an increased willingness to hold long-term and relative reduced selling pressure. If the bull market approaches its peak later, we may see exchange balances increase again as investors throw their coins back to exchanges to prepare for profit-taking at highs. Observing the trend of this indicator can help assess selling pressure and market sentiment.
2. MVRV Z-Score
The MVRV Z-Score is commonly used to identify whether Bitcoin is in an overvalued or undervalued range. It compares the gap between market value and realized value, with higher values indicating that prices may be overheated. Historical experience shows that a Z-Score above 6 to 7 often signals that the market is nearing a peak. Currently, this score is still below 3, indicating that we have not yet reached a frenzy, and there's still room for the market to continue climbing. However, if the Z-Score starts to rise sharply, investors should be particularly cautious of potential high-position risks.
3. 1+ Year HODL Wave
This indicator assesses the proportion of holders who have held Bitcoin for at least a year to gauge the movements of long-term holders versus short-term speculators. The report mentions that as the bull market nears its end, the HODL over one year will significantly decrease, indicating that seasoned players are selling their Bitcoin to new retail investors, resulting in what is known as 'newbie take over.' Although there has been slight selling from long-term holders recently, this volatility is still less than previous historical peaks, suggesting that we have not yet reached a large-scale turnover stage.
4. Terminal Price
The terminal price indicator is a complex on-chain indicator used to estimate potential price peaks in the Bitcoin market cycle. It is based on the concept of 'Transferred Price,' with the terminal price derived by multiplying the 'Transferred Price' by 21 (the total number of Bitcoins is 21 million), resulting in a historically quite accurate indicator that often appears at the peak of a bull market cycle.
Currently, the terminal price is about 188,000, and as Bitcoin value rises, it continues to be adjusted daily. If this cycle replicates past trends, the price peak could break through the 200,000 level. However, just as any estimation carries uncertainty, the terminal price is merely a reference and should not be the sole basis for judgment.
5. Google Search Trends
Although it's off-chain data, Google search remains a key indicator for observing retail sentiment. Historically, when Bitcoin prices hit new highs, Google search volumes have surged significantly. The report mentions that although Bitcoin previously shot up to 100,000 USD, 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 they did in the past, suggesting that the market may still be in the mid-stage, waiting for the excitement to further brew before approaching the peak.
Looking ahead to 2025: cautiously optimistic, do not blindly chase highs
Despite Bitcoin's dazzling performance this year, Forbes also warns that changes could occur from ETF developments to the overall economic landscape:
First, if the Federal Reserve's policy direction reverses or geopolitical black swans re-emerge, the Bitcoin bull market may also slow down or even reverse.
Second, the Trump administration is becoming increasingly friendly towards digital assets, but the legislative and regulatory details remain to be seen.
Moreover, even if the bull market continues, market volatility will remain high, and new investors need to remember to set profit-taking and risk management measures.
Overall, Forbes recommends that investors pay attention to the aforementioned 5 key indicators, as an in-depth understanding and timely observation of changes will help investors rationally respond to potential upcoming market trends. After all, although Bitcoin enjoys the title of 'digital gold', it also always conceals high risks. Whether investors can seize opportunities and look forward to the next wave of rises depends on their grasp of market dynamics. We hope everyone can earn abundantly in the new year.
'Is the 2025 Bitcoin bull market still on? Understand these 5 key indicators to know when to exit!' This article was first published on 'Crypto City.'
