Friday, January 28

Has Bitcoin already hit the top in this cycle?

The focus to position yourself in Bitcoin must always be considered via the long term. I’ve already talked a lot about the short term, volatility and noise.

In this text, we will reinforce the situation Macro the market and compare the behavior with the price so that the current moment can be defined according to the Bitcoin cycles.

Furthermore, we will know what to do in the short term without using emotion, just taking actions based on concrete data.

Bitcoin Reserves on Exchanges

The current cycle is different in time, in addition to the Bitcoin Reserves inside brokers present different behavior compared to 2017 or 2013. Super cycle? This question was raised in the last article on this point.

With that said, cyclical weather extension is entirely plausible and would drive the price to continue the current Taurus race after the turn of the year for the first quarter of 2022.

Indicators mapped with Sequences (MVRV Where Puell Multiple) have not yet returned all of the recent correction move ($65,000-$30,000), and yet the price has made a new all-time high on November 8th.

Analysis on-chain anticipates the future direction of the market as it is possible to identify the reading Macro, however it is necessary to divide into periods (short/medium and long term).

on-chain + bull price structure = MACRO

The focus should never be on the short term as because of the limited Bitcoin offer available on the market it causes big ‘holes’ in the price and big players carry out buy/sell actions the price easily triggers regions with Stop Loss and triggers big moves.

Speculation to make easy money around Bitcoin will always exist. This asset demands this type of investment in the shortest period of time due to its overwhelming valuation on currencies Fiat.

The medium/long term price structure is intact, and even if the short term is lost for some time (as in $65k-$30k) it doesn’t change direction. Macro presented because of the structure in the greater periodicity.

That is, below $58,000 the short term is reversed and so the Bears are in charge with first target around $50,800. It doesn’t change the situation Macro, but it changes market sentiment.

At certain times the regret for those who manage their risk in the short term will be great and so this is more fuel in the fire causing greater volatility and jumping between the ‘holes’ opened in the path that the price will follow.

It doesn’t take large volumes for the price to climb, as the main factor for Bitcoin appreciation is scarcity and supply dynamics.

Short/Long settlements on all USD Exchanges (Daily Chart)

When the last ‘Throw in the Towel’ price tends to reverse the herd’s movement. On days with big sales, killing a few Bears, it is suggested to be cautious in the short term and watch out for the rear.

The price set a new price record while mass liquidations on positions Short not yet seen. Volumes below $60 million dollars occur from the fund at around $30,000. It’s positive as it doesn’t indicate extreme euphoria.

Short/Long settlements on all USD Exchanges (Chart 1h)

In the short term it is possible to see Attacks at strategic points and then: Watch out for the rear! Never forget to manage risk in the longer term so that in the short term you can take advantage of the price volatility that Bitcoin offers.

It is clear by comparing indicators using Sequences to set the cyclical moment and know that Bitcoin is still looking for the top end of the valuation cycle.

See how the moments defined through Sequences in the indicator work in detail Puell Multiple e MVRV in the last comparative article.

MVRV Ratio (Market Value to Realized Value)

The division between market capitalization and capitalization carried out historically points to the main tops and bottoms occurring in the exchange of polarity between cycles (bull & bear).

This is because the distortion between both data that make up the index MVRV occur at these times.

When Euphoria is boiling and overheated, realized capitalization tends to go up exponentially while market capitalization does too, as many players historically take profits after valuations. In this case the index MVRV will be going up.

Basically, it happens the other way around. The market capitalization is going down exponentially while the capitalization is taking place as well, as many players out of pressure and fear are selling their positions to the market.

Human behavior is predictable and this tends to repeat itself. The differential of reading on-chain it is concrete, reliable and purely auditable data. Thus it is possible to define with high probability such behavior and trust that it will repeat.

Puell Multiple

different from MVRV, Puell Multiple it is an index defined through data from the Bitcoin network. In the comparative article mentioned above you can also fully understand how the phases in this indicator work.

This index is complex and highly assertive in the main tops and bottoms in the polarity exchange, as the entire Bitcoin network dynamic is calculated through the data that make up the metric.

The daily value of coins issued in USD divided by the value of the 365-day moving average of coins issued in USD.

When the computational force (Hashrate) is exponentially volatile (whichever side it is), this will cause that in that period until the difficulty adjusts there is a distortion and every 10 minutes, on average, less or more coins (Bitcoin) will be issued.

In the last correction of $65,000 – $30,000 this effect on the indicator occurred taking it down, even reaching the Green Region (historically did not occur in previous Taurus races) due to Hashrate strong correction (about -75%) causing blocks to be placed on average every 20 minutes (twice the normal time).

Longer time to place blocks, less coins issued daily. The composition compared to the value of the last 365 days together with the price in USD also correcting, the points are getting lower thus reflecting in the metric.

Different metrics, identical cyclical moment! Mercado + Rede, basically what moves the Bitcoin Economy observed through two indicators signaling the same behavior.

Your action, buy or sell Bitcoin, will be counted in the chain at some point and it will be possible with high probability to invest by a strategy based on reliable data.

  • By clicking on the graphics legend you are redirected directly to the CryptoQuant and can view the graph live.