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As BTC fell all the way to $54,000 this week, it has risen back to around $57,000 today as I write this article.
Cryptocurrency investor sentiment has fallen to its most fearful level since the end of the crypto winter in 2022. Just three months ago, the entire market was in a state of extreme greed.
But apart from the biggest positive impact of interest rate cuts, it is hard for me to imagine the possibility of BTC breaking new highs again in the short term, which means that there is still a long cycle for the price to reach $100,000.
Causes of decline
1. Mt.Gox Exchange returns funds
Japan's defunct exchange Mt.Gox began returning funds to investors this month, including 142,000 BTC, 143,000 BCH and 69 billion yen in cash. Although creditors are unlikely to sell these bitcoins en masse, the release of a large amount of BTC and BCH still makes the market uneasy.
Photo credit: YOSHIKAZU TSUNO/AFP via Getty Images AFP VIA GETTY IMAGES
2. Expected sale of confiscated Bitcoin
Germany, the United States, and a certain Eastern country are expected to sell off their bitcoins due to confiscations, which is the main catalyst for this price drop.
3. Market weakness
The long-term boring market and the influx of new funds have not brought about a wealth-creating effect, and the fact that most projects have fallen below their issue prices has further led to a lack of trading confidence.
On-chain market indicator analysis
I will analyze the current market conditions from several indicators for reference only and not as investment advice.
MVRV (market price to bid price ratio)
Nevertheless, overall profitability for investors remains very strong, judging by the MVRV[1] ratio, with the average token still making around 1.87 times profit.
According to the different MVRV values, the market can be divided into the following states
When the MVRV value > 3, it means the market may be in a bubble period.
When the MVRV value < 0.8, it means the market is close to the bottom and you can consider buying.
MVRV = 1.87 still means that we are in a bull market. However, from the perspective of proportion, it is not in an extremely optimistic market. Therefore, there is no excessive bubble at present.
NUPL (overall market sentiment and investor profit and loss)
From the perspective of the NUPL[2] ratio, the current overall NUPL ratio is 45.72%, while at the highest point this year, this indicator was 63.57%. In the past bull market peaks, this indicator would generally exceed 70%.
We returned to a more rational level on the eve of the bubble.
According to the different Nupl values, market sentiment can be divided into the following states:
NUPL > 0.75: Overheated (Euphoria/Greed), the market is extremely optimistic, and you need to consider taking profits. Or stay vigilant.
0.50 < NUPL < 0.75: Optimism, market sentiment is relatively positive.
0.25 < NUPL < 0.50: Belief, market sentiment tends to be positive, but there is also some caution.
0 < NUPL < 0.25: Fear, market sentiment is more cautious and investors are worried about falling prices.
NUPL < 0: Capitulation, the market is in a loss and investor sentiment is pessimistic.
According to the current 0.45, the market has entered a phase of positive but hesitant doubt. The market has not achieved a strong trend in any direction.
HODL WAVES
The rainbow chart of HODL WAVES[3] shows that the number of bitcoins held for a long time is increasing, reflecting the trend of strengthening consensus and more investors choosing to hold for the long term.
If the number of long-term holders begins to decrease sharply, it means that many early investors have begun to take profits. This may indicate a bearish market, and you may consider reducing your position or selling.
How HODL WAVES works:
The chart divides the Bitcoin holding time into different time periods (such as 1 day-1 week, 1 week-1 month, 1 month-6 months, 6 months-1 year, 1 year-2 years, and more than 2 years)
The amount of Bitcoin held in each time period is represented by a different color, and the Ripple chart shows how these holdings change over time.
By observing the decrease or increase of long-term holders, we can understand the trend direction of the long-term market. By observing the decrease or increase of short-term holders, we can judge whether the market is overheated or close to the bottom.
The proportion of short-term users reached a peak in April and May of this year, which also corresponded to the highest point of BTC market value.
Summarize
Judging from the above indicators, most users in the current market are still in a profitable state, short-term users bear most of the losses, and the upward trend is unclear.
However, in the long run, the proportion of users holding long-term is still rising, which means that the consensus has not declined with short-term fluctuations. If there is no major market sentiment, such as the impact of US interest rate cuts, the market will remain boring.
Judging from the pricing and on-chain market data, volatility continues to shrink. After a round of large-scale declines releases risk sentiment, it is more conducive to hitting a higher high.
I am still bullish on BTC in the long term, and it is still the best decision for ordinary people to hold it for a long time. Although there will be many trading opportunities in the process. I hope everyone can learn before trading. Try to improve your winning rate in this market. Instead of just being a risk-taker.
In addition, let me share with you the three major narratives of the next round:
BTC Ecosystem: It will unlock more liquidity in the web3 world. This will create an on-chain market that is much larger than the current one and increase more trading opportunities.
Blockchain-based AI services: AI has become a deterministic next-generation world-class product. How to have a non-monopolistic AI that can serve everyone is a problem that needs to be solved.
The technical ecosystem of ZK zero-knowledge proof will bring more efficiency and privacy security to the web3 field, which will also bring more scalability.
This is Miu. We will use simple language to let everyone enter the world of web3, so that we can experience the wealth transfer brought about by the change in distribution relationship.
[1]
MVRV ratio: An indicator used to measure whether the market price of a cryptocurrency is overvalued or undervalued. It compares the price traded in the market with the price at which everyone actually buys. When MVRV>1, it indicates that the market value is higher than the realized value. Generally speaking, most investors make money, but there may be a risk of overpricing. When MVRV<1, it indicates that the market value is lower than the realized value. Generally speaking, most people are at a loss, but it also indicates that there is an opportunity for price troughs.
[2]
NUPL: is a tool used in the cryptocurrency market to measure the overall market sentiment and investor profit and loss. It determines whether the market is in a profit or loss state by comparing the market price with the cost basis held by the investor. The NUPL indicator reflects the overall profit and loss situation of the market and is suitable as a reference indicator for long-term investment. Short-term market fluctuations may not be fully reflected in NUPL, so it needs to be used in combination with a long-term investment perspective
[3]
HODL WAVES: is a tool for analyzing Bitcoin holdings. The chart shows the percentage of Bitcoin held over different time periods, providing insight into market sentiment and investor behavior. Meaning long-term holding without selling.
