Indicators Suggest Crypto Bull Cycle Could Be On the Horizon, Despite Market Uncertainty
Summary:
Despite a steady crypto market over the past three months, five notable on-chain indicators suggest that the bull cycle might just be starting. While crypto's total market cap has lingered around $2.5 trillion, an analyst identified Bitcoin’s dominance (above 56%), MVRV Z score (under 6), Puell Multiple (peaks over 3 are yet to be seen), HODL Waves, and miner revenue per hash as potential signs that the bull run might just kick-off. However, several other metrics such as the RHODL ratio and the CVDD metric hint at a market reaching its peak.
Despite the cryptocurrency marketplace having experienced steady movement over the last three months, a minimum of five blockchain-based indicators point towards the possible commencement of a bull run, as interpreted by a cryptocurrency expert. Since February ended, the overall value of the cryptocurrency market has held steady around the $2.5 trillion mark, leading observers to express divided opinions about whether the current cycle has reached its end. However, five distinct blockchain indicators, brought to attention by analyst "ELI5 of TLDR" in a May 19 article on publication X, suggest that the cycle may indeed just be starting.
A key indicator in this analysis is Bitcoin dominance above 56%. It's been historically observed that the cryptocurrency bull cycles initiate with a strong dominance of Bitcoin, as most investors would have largely disposed their altcoins during the previous bear market cycle. Typically, the emergence of altseason — a period when the dominance of Bitcoin reduces — marks the next phase of the bull cycle, inching us closer to its end. However, currently Bitcoin (BTC) still strongly leads the market with a dominance rate of over 56%, as per data from TradingView. Bitcoin's market share has stayed above 50% since October 2023.
The Bitcoin MVRV Z score, an indicator which contrasts the current market cap of the asset with its historical average, usually peaks around 6 during the height of each cycle, as per LookIntoBitcoin. Presently, it stands at under half of that value, and hasn't exceeded 6 since its last peak in March 2021.
The Puell Multiple, another key indicator usually lining up with cycle peaks, has yet to peak this cycle. This data point is represented by the daily Bitcoin mining value divided by its year-long moving average. As reported by Coinglass, the Puell Multiple dipped under one following the halving on April 20. Peaks that go over the number 3 typically match up with cycle peaks. During the mid-March price surge in 2024, it only managed to reach 2.4.
A graph based on HODL Waves, indicating the amount of Bitcoin held by cohorts, displays a bullish outlook for Bitcoin, according to LookIntoBitcoin. Declines in recent peaks indicate that selling pressure may be easing up, with room for potential gains. ELI5 noted, "More BTC newcomers are less [committed] and are more likely to panic sell. Looks like we can still go up."
The final bullish blockchain metric, miner revenue per hash, essentially shows the earnings of miners for their proof-of-work. After the previous market cycle peaks, ELI5 pointed out that there were two occasions when this figure spiked to $0.3 per terahash per second.
Contrarily, there are several blockchain metrics that suggest the market might be reaching saturation and possibly peaking, such as the RHODL (realized HODL) ratio, which contrasts the average purchase price of recent coins with those bought 1-2 years earlier. Higher prices paid by newcomers for BTC compared to older holders could signal a peak in the market, a trend visible in March.
Likewise, the Cumulative Value-Days Destroyed (CVDD) metric, which keeps track of value-time destruction as ownership changes hands, appears to have peaked. Accumulated movement of old coins could indicate that the market is hitting its peak, according to ELI5. As of the time of writing, BTC was trading at a value of $66,668, marking a 10% decrease from its mid-March peak.
Published At
5/20/2024 7:44:56 AM
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