Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
Has the Crypto Bull Market Begun?
In Brief
- Three signals suggest the crypto bull season has started.
- On-chain data helps understand investor psychology and market phase.
- Historical patterns provide confidence beyond mere historical data.
- Certain commonalities in past cycles exist and they instill confidence beyond historical data. On-chain data, in particular, greatly aids in understanding the stage of investor psychology and market sentiment. Today, we will discuss why 3 signals are telling us that the crypto bull season has already begun.
- Has the Crypto Bull Market Started?
- Previous major bull markets have started with these signals. According to on-chain technical analysis, long-term charts yield clearer results. For instance, the reason for the last January 12th drop could be a $5 billion sell-off, but the fact that investor profitability neared 95% had been warning us for a while that we should expect a price correction.
- Value Map
- The on-chain value map of BTC was created by the popular crypto analyst therationalroot. It combines three fundamental on-chain indicators: realized capitalization, liquid supply, and the number of coins destroyed. The analyst strives to determine the bottom and peak points of BTC price by combining these three indicators.
- There are four different colors, and the middle line indicates that it is neither overvalued nor undervalued. The base and ceiling, on the other hand, indicate the opposite. When the BTC price significantly deviates from the "fair value," it is either overvalued or undervalued. Currently, the price has returned to fair value and tends to continue upwards. This means BTC may soon enter a path to becoming overvalued.
- Realized Market Value
- Realized market capitalization prices different parts of the supply at different prices (instead of using the current daily close). Specifically, it is calculated by valuing each UTXO at the price it last moved. It is used for long-term cycle detections and yields the same result as one of the components in the first chart.
- To date, all bear markets have caused a slight decline in realized capitalization and its several years of horizontal trend.
- Long-Term Holders Start Selling
- The chart shared by Glassnode helps us understand the bull markets that develop with long-term investors starting to sell to short-term traders. The blue line represents long-term holders, and the red represents short-term investor traders. During a bear market, long-term investors who have accumulated start selling their profitable assets, and eventually, new investors become a kind of fuel for the bull market peak.
- This chart will mature as short-term traders accumulate more. Perhaps entries through the ETF channel should also be included somehow because a significant amount of new investors will buy BTC through the ETF channel in the new cycle.
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