One of the most talked about topics among people in the currency circle recently is: "The bull market in the currency circle has arrived." So today let us use various data to see whether "#牛市 " has really arrived. I will Let me share the key data I use when judging "Niu Hui", let's get started now!
Bull market judgment benchmark
There are many ways to judge the market situation in the currency circle. Some people will look at the exchange’s funding rate, Bitcoin holdings, or various technical indicators. But to me, these two numbers are the most important — #資金量 and #活躍度 .
"Total funds" refers to the total amount of funds in the currency circle as a whole. We will look at whether funds from traditional finance or institutions are flowing into the currency circle to judge the authenticity of the price increases of these cryptocurrencies. For example, if the amount of funds in the overall currency circle does not increase, but the prices of a few tokens increase, it may be due to institutional speculation, short-term market hot spots, etc., rather than the arrival of a bull market.
"Activity" refers to the level of activity on the chain. We will look at the active addresses and transaction volume on the blockchain to judge users’ needs for the currency circle and DeFi. The increase in activity level represents, to a certain extent, the return of users in the currency circle, which will increase the overall demand for cryptocurrency and increase currency prices.
Amount of funds in the currency circle
The funds in the currency circle not only exist on the blockchain, but can be simply divided into two parts: on-chain assets and off-chain assets.
On-chain assets: including stablecoin market value, DeFi total locked position (TVL) and other data that can be queried on the chain
Off-chain assets: mainly come from centralized exchanges, digital asset investment companies (#比特幣ETF managers), companies that buy crypto assets (MicroStrategy, Tesla, etc.)
For on-chain assets, I like to start with “stablecoins”.
Here we need to observe the changes in the total market value of stablecoins to see whether funds are flowing into the currency circle: The following picture is a comparison of the market value of stablecoins and the total lock-up volume. We can see that the market value of stablecoins has increased after the Terra Luna incident ( There will be a step-like plunge at the end of April 2022, and then continue to decline slowly until it bottoms out around August 2023. Then there were signs of rebound in the last three months (the market value of stablecoins increased).
The data captured from #Artemis will be more obvious. The data shows that after the market value of stablecoins bottomed out in August this year and went sideways for a period of time, the total market value of stablecoins began to continue to grow, climbing from about $118B. It’s now around $124B — about a 5% gain.
Now let’s look at off-chain assets. This part of the information is relatively opaque (not every company will issue financial reports, and financial reports are also lagging information), so I will look for reports issued by Bloomberg and Coinshares to observe changes in off-chain assets. .
From this report #CoinShares we can see that Weekly Crypto Asset Flows (weekly net asset inflows in the currency circle) have been positive for nine consecutive weeks, and last week there was an inflow of $346M, which represents Some of the funds off the chain are flowing into the currency circle, which is similar to what we see in the on-chain data.
Retrieved from CoinShares report
Combining on-chain and off-chain asset data, what we observe is that funds are flowing into the currency market from all parties. Because investors are optimistic about the currency market, they are slowly buying cryptocurrencies or exchanging fiat currencies for stablecoins.
On-chain activity
I like to measure the activity on the chain by "number of transactions" and "number of active addresses".
The greater the number of transactions, the more people are using DeFi, mining, lending, participating in new projects, airdrops, etc. on the chain.
The number of active addresses is usually compared with the number of transactions to see whether the number of transactions is generated by a small number of addresses and whether there are new external users joining the currency circle.
Here we use the data of the past three months to analyze and look at the changes in the number of transactions and active addresses. The first is the number of transactions. It can be seen that the number of transactions has been stable at around 10 millions before, but it has started to rise since mid-November.
Notice! The devil is in the details, let's match it with the "number of active addresses" to see what exactly happened. The following is the number of active addresses in the past three months. You will find "Hey, why is the number of transactions increasing, but the number of active addresses has not changed significantly?"
Note: The number of active addresses has decreased in the past two days. I guess it comes from the data error of NEAR Protocol (I have seen the same thing on other aggregation platforms), so it is correct that there is no obvious change, not a decrease.
If the number of active addresses increases, we may be able to speculate that the increase in the number of transactions is due to the increase in addresses (users). But based on the current situation, the conclusion will become: "The number of new "on-chain" users in the currency circle has not increased much. The increase in transaction volume is due to the fact that old users are using more products on the blockchain. and services - whether it is due to optimism about the market or chasing hot spots (inscriptions, NFT, etc.)"
market stage
The currency market can be roughly divided into four stages, which correspond to the bull-bear transition cycle of the market, namely - Accumulation (accumulation period), Markup (rising period), Distribution (distribution period), and Decline (falling period).
From the two indicators of "total funds" and "activity", I think we are now at the end of the accumulation period (1-3) and are about to enter the rising period (2-1). In short, the current market position is just about to enter the early stages of a bull market.
why would you say so? From the above two indicators, we can observe the following two points:
The overall amount of funds in the currency circle has increased, and funds are pouring in both on and off the chain.
The transaction volume on the chain has increased, but the number of active addresses has not changed significantly.
I think the overall increase in capital volume mainly comes from retail investors and institutions’ expectations for the adoption of Bitcoin spot ETFs. These expectations are translated into increased demand for spot and stablecoins, but do not directly affect the number of active addresses on the chain. ”.
In other words, the capital inflows seen now may come more from expectations in the news than from any innovative applications in DeFi and GameFi itself that attract users, because the number of active addresses has not increased significantly.
The Bull Market Catalysts You Should Pay Attention to
I mainly focus on the following two - "Bitcoin Spot ETF" and "U.S. Interest Rate Cut".
The adoption of Bitcoin spot ETFs in the United States currently seems unstoppable. Currently, 12 ETF applications, including BlackRock, are being reviewed, and SEC members have publicly stated that there is no reason to block Bitcoin ETFs.
Do you still remember the rapid 8% increase caused by Cointelegraph’s previous announcement that “Bitcoin ETF is officially approved”? Although it was later confirmed to be false news, it also showed investors’ desire for the benefits of $BTC ETF.
The passage of the Bitcoin ETF is just the first stop. There will be $ETH ETFs in the future, and even other types of cryptocurrencies can use this passage as a precedent to increase the chance of passing. This chain reaction will be It is a strong driving force that supports the upward trend of the currency circle in the "rising period".
The interest rate cut in the United States is another catalyst that I am optimistic about the currency circle entering the bull market. The following is the monthly inflation index (%) in the United States in the past two or three years. We can see that with the substantial increase in interest rates in the United States, inflation seems to have improved. Some control (which is a good thing).
The current interest rate in the United States is about 5.5%, which attracts a large amount of funds to buy U.S. bonds or deposit them in banks instead of placing them in risk markets (stock markets, currency circles). As long as U.S. inflation is under control, the U.S. Federal Reserve's interest rate cuts will attract funds back to the risk market.
Summarize
The above data summarizes my macro views on the current currency market. You can then use these data to make your own market judgments. Although this information may not be useful to "long-term DCA buying investors", at least we know that the market is moving in a good direction, and that is enough.
The above article is taken from my Substack, welcome to follow it!
