Bitcoin Network Momentum
By monitoring the blockchain momentum we are able to identify when we are closing in on the start of the next BTC price bull run.
Month over Month Change: -4.5%; YTD Change: -28.3%
Bitcoin Network Momentum rebounded from an 11-month low of 211k in mid Sept to its current value of ~220k. On-chain volume (proxy for long term investor activity) continues to diverge from the price movement of BTC.
As we mentioned in earlier reports, previous BTC market cycles have gone as follows:
Early Bear Phase: Daily transaction value have dropped down to 100K BTC a day. Price is falling.
Late Bear Phase: Daily Transaction values are rising. Price is broadly flat
Bull Phase: Daily Transactions have reached a sufficient minimum value (220K in the last market cycle, 150K in the one before) where the market finally responds and price increases.
Market-Value-to-Realized-Value (MVRV) Ratio
Market Value: Equal to the latest price multiplied by the number of Bitcoin units outstanding. Instead of counting all the mined coins at equal, current price, Realized Value (RV) refers to the aggregated market price of all BTC UTXOs when last moved.
Realized Value: Adjusts for lost coins and coins used for “HODLING.” MVRV is calculated by dividing Market Value (aka market cap) by Realized Value (tokens outstanding x price when token last moved) on a daily basis. Two historical thresholds emerge: 3.7 (which signified overvaluation) and 1 (which signified undervaluation).
Month over Month Change: -20.0%; YTD Change: +75%
Bitcoin’s MVRV fell 20% in the past month with BTC’s price dropping 19%. The current value of 1.48 and is approaching the undervalued threshold of 1.0.
Introduced by Trace Mayer as a way to gauge the current price of Bitcoin against its long range historical movements (200-day moving average), the Mayer Multiple highlights when Bitcoin is overbought or oversold in the context of longer time frames. The MM is calculated by dividing the Bitcoin price by the 200-day moving average. The MM essentially quantified the gap between the price and 200-day MA to identify points where Bitcoin enters a speculative bubble. In other words: when its price significantly exceeds its intrinsic value or points of seller exhaustion. A Mayer Multiple above 1 could be considered a sign of a bull market and below 1 could be considered a bear market. Any multiple above 2.4 threshold has historically shown to signify the beginning of a speculative bubble.
Month over Month Change: -27.7%; YTD Change: +61.1%
After being rejected at long term resistance of 2.4 (dotted line), BTC’s mayer multiple continues to trend downward to a current level of 1.02. The multiple has pulled back to the key 1.0 level and either hints at an impending bear trend or possibly an opportunity to buy at a good price.
Bitcoin Dominance pulled back from multi-year highs to its current value of 67%
(-1.1% MoM, +28% YTD). BTC dominance dropped this week along with the price of Bitcoin. Altcoins also continued to struggle as more outflows of capital occurred in the marketplace. People hesitated once they saw the price of Bitcoin drop to the $8,000 levels. Along with social media sentiment and on-chain activity, sentiment was also identified through the “fear index”
. As we mentioned in a previous article, the index was showing multifactorial fear in the market post Bitcoin sell-off.
Bitcoin Fundamentals Remain Strong
What people forget is that Bitcoin has still experienced 115% growth
year to date despite the recent sell-off. Recently, Mark Yusko of Morgan Creek Digital shared some insight
to the recent volatility. He stated that “The daily price of bitcoin doesn’t matter… It has been alive for 10 years [and] every year, other than once — 2015, it has made a higher low. The market cap has grown every single year, Mark said. Every fundamental of bitcoin… usage wallets, block size transaction, several transactions and rising hash rates point to a higher price.”
We agree with Mark on his statements as many investors need to take a step back and understand the Bitcoin fundamentals. Many people forget Bitcoin has only been around for 10.5 years. Historically speaking, the adoption curve for any groundbreaking tech has been 20+ years. We took a look at some of the key fundamentals Mark was outlining during his recent interview.
What About “Altseason” ?
As we mentioned in previous market reports, Bitcoin testing the 72% market dominance levels was crucial from a technical standpoint. We stated that back in 2017, the altcoin boom was fueled after Bitcoin started rejecting these dominance levels. Most recently Bitcoin rallied hard to retest that arena, but it resulted in a hard rejection of the strong resistance level. We then saw the most recent sell-offs and Bitcoin going back down to stabilize the 68-70% dominance level. Altcoins still have a chance as some of the largest Altcoins have been gaining on Bitcoin slightly. Ultimately without utility kicking in for alts, we believe it will be difficult to replicate the 2017 boom. Bitcoin is still king as institutions are mainly focusing on it right now. With the futures markets expanding, FIs will ultimately need to continue building their Bitcoin inventories and Bitcoin still remains one of the only cryptocurrencies with enough liquidity to support the large financial firms. As we know by now, anything can happen in crypto though.. so we will continue to watch dominance levels. Again, we can see some of the largest alts with a slight gain on BTC the last 30 days, but it hasn't been strong enough for us to build the “alt season” narrative just yet.
Last 30 Day Performance:
Ethereum: -8.50% ( slight gain on BTC )
XRP: -9.63% ( slight gain on BTC )
Litecoin: -23.8% ( no gain on BTC )
VF Market Report Authors
Jeff Guzzi (Founder): Jeff has acquired hands on experience in Portfolio Management, Venture Capital and Private Equity. Between Merrill Lynch / Edge and a mid-sized asset manager in Chicago, he earned a Series 7, Series 63 and Series 65. Jeff started investing, researching & mining cryptocurrency in 2013. He founded Visionary Financial because he strongly believes Crypto & Blockchain are going to change financial infrastructure.
Kenny Cheung (Analyst): Kenny is a senior trader at a market neutral Crypto Fund. He has worked in traditional finance with experience in fixed income trading, investment banking and equity research at bulge bracket firms including Merrill Lynch, Credit Suisse and CIBC World Markets. He holds a Bachelor of Commerce degree from the University of Toronto and has completed the Chartered Financial Analyst Program ( CFA )
Sudarshan M: (Analyst): Sudarshan is a long time crypto-enthusiast. Pulled in by bitcoin early on, it didn’t take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject. He is currently a researcher at the University of Nicosia. He is also the author of two research papers and a book on Blockchain’s future in Education titled: An Academic Overview of Blockchain - Applications in Educational Institutions. Sudarshan is an entrepreneur, blogger, educator and researcher.
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