Bitrabo Editorial
A detailed examination of thirteen on-chain indicators in the most recent Capriole Investments’ “Bitcoin Update” by Charles Edwards, the founder, and CEO, delves into the current status of Bitcoin to answer a crucial question: Has the Bitcoin cycle top been reached?
Following a significant technical breakthrough above $65.5K, briefly touching $70K, Bitcoin underwent a sharp reversal a month later, hinting at a potential cycle peak. Edwards highlights a unique pattern where Bitcoin has not consistently printed new highs after breaking an all-time high, suggesting a possible period of consolidation and market weakness.
Insights from On-Chain Bitcoin Data
#1 Supply Delta + 90 Day CDD: Metrics displaying supply shifts and coin destruction days often signal cycle tops. A recent rounded top formation following a sharp increase in both metrics signifies a bearish outlook, indicating impending market downturn based on supply dynamics.
#2 Long-term Holder Inflation Rate: The escalation of this rate from 0.5 to 1.9, approaching the critical 2.0 threshold historically linked to cycle tops, suggests that long-term holders may increasingly consider selling, marking a bearish trend.
#3 Hodler Growth Rate (HGR): A stagnant HGR for over six months, in line with past cycle tops, indicates potential cash-outs by long-term investors, scoring bearish in the analysis.
#4 Bitcoin Heater: Currently neutral, this metric examines market exuberance through funding, basis, and options, noting a lack of significant leverage in the market contributing to its neutral stance.
#5 Dynamic Range NVT: Despite increased on-chain activity, this metric remains neutral, indicating a well-balanced market valuation amidst innovations like Ordinals and Runes.
#6 On-chain Transaction Fees: Elevated transaction fees, despite some spikes, suggest high network demand but mirror the decrease seen in April, maintaining a neutral stance in the analysis.
#7 Net Unrealized Profit/Loss (NUPL): Positioned near the euphoria zone at 74%, the NUPL reflects a neutral state, indicating market participants’ profitability without excessive exuberance.
#8 Spent Volume 7-10 years: A substantial rise in spent volume from older coins, especially a significant transaction involving Mt. Gox distributions, suggests potential market pressure from large sell-offs, marked as bearish.
#9 SLRV Ribbons: Showing a bearish crossover for the first time this year, this metric indicates a concerning trend aligning with a bearish outlook, although not yet signaling a cycle top.
#10 Dormancy Flow: High dormancy flow rates resembling peaks in previous cycles indicate a nearing potential cycle top, scoring bearish in the analysis.
#11 Percent Addresses in Profit: With over 95% addresses in profit, the recent decline in this indicator suggesting profit-taking turns bearish, hinting at a possible price drop.
#12 Mayer Multiple: Remaining below the historical 2.5 threshold for cycle tops, the Mayer Multiple stays at 1.0, reflecting a neutral state amidst a heated market not yet reaching extreme levels.
#13 US Liquidity: The persistent decline in liquidity strongly correlated with Bitcoin’s price trends indicates a bearish outlook for Bitcoin according to the analysis.
Implications for the Bitcoin Cycle
Among the analyzed metrics, eight exhibit bearish signals, five remain neutral, and none are bullish, suggesting a potential cycle top in Bitcoin. While caution is advised due to mixed signals, technical patterns like the potential Wyckoff Accumulation on the daily chart offer glimpses of bullish potential.
Charles Edwards notes the puzzling abundance of bearish on-chain data just two months post the halving, emphasizing the importance of considering technical patterns and broader market behavior alongside on-chain metrics for a comprehensive analysis.
Although on-chain metrics lean bearish, potential nuances like typical summer inactivity or unique mid-cycle trends prompt cautious optimism and vigilant risk management as Bitcoin’s trajectory unfolds amidst fluctuating signals.
Regardless of the bearish tone from on-chain data, Edwards remains optimistic about a potentially robust 12-month post-halving return for Bitcoin beyond Q4. Bitcoin is currently trading at $62,747.