21:55Market Analysis Demonstrates Bitcoin Price Is Nowhere Near Top Of Run
A deeper dive into bitcoin’s fundamentals and recent market trends shows that the price bull run is nowhere near its top.
Bitcoin has been consolidating around the $1 trillion market capitalization threshold for almost three months, which is a very healthy development during a bitcoin bull market. So, what’s happening behind the scenes, and how should investors be thinking about the recent price action of bitcoin?
Let’s dig in.
BTC price action over the last three months
Long-Term HODLers Are Accumulating
Miners Are Accumulating
With hash rate lagging far behind price action over the past year, and a global semiconductor shortage occurring simultaneously, expect miners to continue to be net accumulators of BTC, as profit margins remain wide across the industry.
Miner net position change since the May 2020 Halving
Obviously, the market value of new bitcoin issued greatly increases in a bull market, and this can be seen not only during the recent run up but also past bull market cycles following the halving. Currently, the Puell Multiple is at 2.5, following the healthy 75-day consolidation. When compared to previous bull markets, a similar pattern occurred around the $100 mark in 2012 and the $3,000 to $4,000 level during 2017.
Puell Multiple over the history of Bitcoin
This measure can be thought of as a more reliable way to measure the true economic value of the Bitcoin network. Realized cap at the time of writing is sitting at $370 billion, increasing approximately $250 billion since November. To put this move into context, the realized capitalization of bitcoin at the height of the previous bull market was $90 billion. The recent parabolic rise in realized capitalization can be seen as an immense amount of capital flowing onto the network.
Realized capitalization of bitcoin
The recent pullback in MVRV, or rather the rise in realized cap as market cap consolidates, is a very bullish sign, and should give investors confidence that this bull market has a long way to run.
One of the primary reasons for the surge in interest in Bitcoin over the past 12 months, the macroeconomic backdrop remains extremely favorable, and you shouldn’t expect that to change anytime soon.
While it is true that rates being raised is not out of the question, it would be crippling for a global economy that has become accustomed to negative real rates over the past decade. In a very basic sense, investors should have two distinct intentions in regards to growing and preserving their capital in this macroeconomic environment:
How do I protect against debasement/dilution risk?
In this deflationary scenario, anything with counterparty risk (any asset in the extremely leveraged banking system) is something you should hold with extreme caution. The interconnectedness of financial markets ensures that contagion spreads fast, and the default/credit risk of one market participant is something that should worry everyone.
Without going too much deeper on this matter, bitcoin is the solution to both of these market outcomes. With bitcoin, you are insulated from the record monetary debasement that is occurring in legacy financial markets, but you are also protected from a deflationary scenario in which systematic risk in the banking system does not affect you because of the network’s native self-custody attributes.
Conclusion: Stay Bullish
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