Recent price volatility has sparked lively discussions about Bitcoin's (BTC) market cycle, as investors monitor signals from on-chain data and futures contracts for clarity.
The MVRV ratio is currently around 2.1, a threshold that history shows often precedes strong price increases. This signal indicates that we are in the stage before the excitement. Nevertheless, short-term volatility does not shake the accumulation behavior of investors, as they maintain their faith in Bitcoin's long-term prospects.
Moreover, data on positions and valuations still reinforces the argument for a higher price, although market sentiment has faced some challenges in recent weeks.
Could the growth of NVT redefine Bitcoin's value?
The network value to transaction ratio (NVT) has surged to 759, indicating that the market value of Bitcoin has far exceeded transaction volume. History shows that such spikes often reflect investor confidence in holding BTC, as value increases faster than network activity.
Conversely, a high NVT can also warn of overvaluation. However, growth in circulation indicates stability around this metric. This change has laid the groundwork for stronger price increases, with consistently high NVT levels often marking a reaffirmation of market confidence.
The increase in the Stock-to-Flow ratio indicates that supply is tightening.
The Stock-to-Flow ratio of Bitcoin, comparing circulating supply to new issuance, has surged to 426, indicating that supply is tightening. Increases in this metric often occur before significant positive changes, as scarcity enhances Bitcoin's investment appeal.
In fact, the current trajectory reflects previous cycles where increasing scarcity has driven rapid price increases. This trend aligns with the confidence of long-term investors, reducing selling pressure and reinforcing the narrative of Bitcoin as a scarce asset.
Data on the funding rate shows that investors are still leaning towards the bullish side.
The funding rate of Binance primarily remains in positive territory, confirming the trend of investors moving towards long positions. Prolonged positive rates indicate that market participants are willing to pay high fees to maintain long positions, emphasizing strong speculative demand in the market.
However, temporary declines may have eliminated weak players, indicating that corrections may still occur. Nevertheless, the consistently positive funding rate continues to emphasize confidence in the potential continuation of the bullish trend.
Are these signals paving the way for another price increase?
The trends in NVT, Stock-to-Flow, and the funding rate of Bitcoin are all consistent in painting an optimistic picture for the future. With expanding valuations, tightening supply, and robust leverage demand, current evidence supports the potential for continued upward movement.
If history repeats itself, these signals could lay the foundation for the next major price increase of Bitcoin.