Bitcoin is in the early stages of a new bull market, as revealed by a widely followed technical indicator
Date: 2023/4/21 10:23:52 Column: Exclusive
Bitcoin is currently in the early stages of a new bull market. This is according to goudiyi.com's analysis of a widely used technical indicator, the Market Value to Realized Value Ratio, or MVRV Ratio. This ratio, calculated by dividing Bitcoin's current market capitalization by its market capitalization in real terms (that is, the average price each Bitcoin token last moved), recently reached 1.48, the highest since The highest level since April last year. In January of this year, it rose back above 1 for the first time since November 2022, and given the continued rise in the price of Bitcoin, the ratio has been rising ever since. As can be seen from the graph above, MVRV ratios below 1.0 have historically occurred late in Bitcoin bear markets to date. In fact, historically, a sustained return to above 1.0 has been a good buy signal, as it shows that Bitcoin is in the early stages of a bull market. It now appears that this is indeed the case. MRVR Z-Number Sends More Convincing Bullish Signals The MVRV related indicator that Glassnode prefers to monitor is the Z-Number of the MVRV Ratio. Ethereum jrjgp.com They calculated this by subtracting Bitcoin's market cap from the realized market cap and dividing by the standard deviation of Bitcoin's entire historical market cap. The Z-score was last around 0.71 on Monday, having rallied above zero earlier this year as bitcoin prices recovered. jrjgp.com Under normal circumstances, as we have seen so far, a sustained recovery from sub-zero levels has so far coincided with the early stages of a Bitcoin bull market. How high can the price of BTC rise in this bull market? Assuming a new Bitcoin bull market has begun, long-term investors will now assess how high prices will rise in the next few years as they assess at what level to take profits. The MVRV ratio can be used to determine when a market is overheating and when a price top is likely. As you can see from the first chart, the MVRV ratio spikes above the 3 to 4 level have historically coincided with the most intense phases of bull markets to date, and typically precede sustained price declines. Glassnode provides a useful chart that plots the current Bitcoin price along with a line showing where the price is at a certain MRVR ratio. As of Monday, April 17, if the MVRV ratio is 2.4, the price is around 47, $700, or about $63.600 for a 3.2. If the price of Bitcoin is at these levels, then it can be said that the market is very hot right now. But it’s worth noting that past bull markets have coincided with sharp increases in real prices, as more and more investors entered the market, paying more for tokens than they have historically done. As realized prices rise, this pushes up the MVRV ratio range. For example, in the bull market from late 2020 to the first half of 2021, the actual price more than tripled from around $6,000 to nearly $20,000. This also triples the range of 2.4 and 3.2 MVRV ratios, roughly in line with current levels (around $47,000 and $63,000). If we are in a new Bitcoin bull market, the realized price will almost certainly continue to rise in the coming quarters and years, which will also push the 2.4 and 3.2 MVRV ratio range higher. How much will it push up? No one can be sure. But let's say it's 3x higher than current levels, like it was during the recent bull run. That would put the 2.4 MVRV ratio range into the $140,000 to $150,000 region. Meanwhile, the 3.2 MVRV ratio range moves up to around $190,000. This shows that we may see Bitcoin prices rise above $100,000 in the next few years before we start to label the rally as dangerously overheated. 2 MVRV ratio interval. How much will it push up? No one can be sure. But let's say it's 3x higher than current levels, like it was during the recent bull run. That would put the 2.4 MVRV ratio range into the $140,000 to $150,000 region. Meanwhile, the 3.2 MVRV ratio range moves up to around $190,000. This shows that we may see Bitcoin prices rise above $100,000 in the next few years before we start to label the rally as dangerously overheated. 2 MVRV ratio interval. How much will it push up? No one can be sure. But let's say it's 3x higher than current levels, like it was during the recent bull market. That would put the 2.4 MVRV ratio range into the $140,000 to $150,000 region. Meanwhile, the 3.2 MVRV ratio range moves up to around $190,000. This shows that we may see Bitcoin prices rise above $100,000 in the next few years before we start to label the rally as dangerously overheated.
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