Insight #5

This week, we dive into the state of the bull market, assess real demand for high-priced coins, and analyze the latest market trends. Is the consolidation nearing its end?

Welcome to the fifth issue of Adler's Crypto Insight.

Today, we will discuss the following topics:

1. Market Review.

2. Why hasn't the bull market ended?

3. What is the real demand for previously expensive coins?

4. The end of consolidation and the support level.

5. Conclusions.

Throughout the week, Bitcoin traded in the $61-56K range without forming a clear trend. It was essentially a very calm trading week. The resistance was the 200-day SMA at $68.2K, above which the price failed to hold.

An interesting event this week was the news from Dubai, which recognized cryptocurrency as an acceptable method for salary payments, indicating the growing adoption of digital currencies.

Another significant event involved ETFs: BlackRock surpassed Grayscale in assets under management, driven by an outflow of funds from Grayscale and an inflow into BlackRock. Additionally, Grayscale appointed a new CEO. If you're not aware, the previous CEO, Michael Sonnenshein, launched a Bitcoin trust and attracted substantial investments totaling 653K BTC. The problem was that clients were unaware that there were smart money players on the market who gladly sold expensive coins to newcomers. As a result, some clients had to wait four years to realize a profit. In reality, Bitcoin's four-year CAGR never dropped below 24%, but the fact that investors in the fund had to wait four years is quite epic.

Has the Bull Market Ended?

The bull market will end when the demand for buying expensive coins is less than the supply of those wanting to sell them. Let's look at the data and determine whether the current market situation can be considered the end of the bull cycle.

The first thing we need to understand is whether there is a bubble in the market right now.

The Bubble vs. Crush Market Structure metric shows that the first bubble of this cycle formed at the $73K level. The current value has dropped to 1.02, which is the baseline, indicating no bubble in the market. Bubbles form when Bitcoin's market capitalization grows faster than its realized capitalization, essentially reflecting speculative interest. In other words, during such times, many investors buy Bitcoin at inflated market prices due to FOMO (Fear of Missing Out).

The next metric that will help us understand whether the bull market has ended is the standard deviation of MV/RV, smoothed by two moving averages over 30 and 365 days.

In the graph, we can see that the current bull cycle is developing quite steadily without significant anomalies or sharp jumps. The 30DMA MVRV Z-Score is at 1.8, indicating minimal overvaluation of Bitcoin compared to the annual average of 1.6. We see that in previous cycles, the 30DMA MVRV Z-Score rose above 5, which was usually accompanied by a price peak and subsequent correction. This confirms that the current bull cycle is in an active phase, and as long as the metric does not reach extreme levels that could signal a significant risk of correction, the market can be considered bullish.

What is the Real Demand for Coins?

First, let's check the behavior of experienced investors. We see that the activity of long-term holders reached its peak when Bitcoin was at $73K. This means that at this level, a significant portion of experienced investors decided to take profits, leading to a rise in the metric to 23%.

Currently, the activity of experienced investors has decreased to 4%. This indicates that long-term holders are not in a hurry to sell their assets despite the current price levels. This could be a sign of confidence in further growth and expectations of even higher prices in the future.

Let's check how many people are willing to sell Bitcoins on exchanges. The value of the Exchange Flow Multiple metric, which has decreased from 1.73 to 0.8, indicates a significant decline in the activity of sales on exchanges.

All of this tells us that the current bearish pressure on the market is minimal, and at the moment, investors are not in a rush to sell their assets on exchanges.

Let's assess the demand by looking at the volume of coins that are currently in loss and were bought at a price higher than the current market price of $59.8K.

The Supply in Loss metric shows the percentage of the total volume of Bitcoins (in percentage) that is currently in loss. The current value is 22%, which means that 22% of all Bitcoins were bought above the $59.8K level, which is approximately 4.3M BTC. Such a volume of coin exchange occurred over the last five months. Can this be considered a sustainable demand for previously expensive coins? Obviously, yes.

Finally, let's take a look at the metric for realized profits and losses.

The current value is 3.4 points, which essentially means sales at a loss. A further drop of the metric by 3.4 points would trigger an orange alert and define this as a local bottom. Therefore, the current 365-day SMA average purchase price of BTC can be considered a strong support level for the ongoing consolidation.

Conclusions:

We are approaching the end of the consolidation, which, in my opinion, has gone very well. We see that there is demand for previously expensive coins, and it is occurring within the framework of the bull cycle. We see that the current realization of coins is happening at break-even or a loss, signaling the nearing end of the consolidation. We also saw that there is no bubble in the market, and the standard deviation of the MV/RV metric shows that the current Bitcoin price is not overbought. We also learned that there is minimal bearish pressure on exchanges, and the 365-day SMA average purchase price of Bitcoin ($50K) could act as a strong support level at the end of the consolidation.

Good luck in the upcoming trading week!

AAJ

P.S.

Please write in the comments about the topics and questions that concern you, and I can address them in the next issue.