Bitcoin's 486 days marathon after halving to reach the 150,000 !The Basics of Bitcoin's Analysis
As we approach the anticipated fourth Bitcoin halving on April 15th, 2024, the mining of Bitcoin’s 19,656,962nd coin is a testament to the network’s enduring strength, bringing the circulating supply to 90% of the total. The ‘rainbow chart’ remains a popular model for visualizing Bitcoin’s logarithmic growth and its cyclical price patterns.
The halving events, pivotal in Bitcoin’s economic model, systematically reduce the block reward, thereby constraining the new supply of Bitcoin. The current reward stands at 6.25 BTC per block, which will decrease to 3.125 BTC post the fourth halving. This deflationary mechanism has historically triggered bullish market sentiments as the reduced flow of new coins amplifies scarcity.
Analyzing the cycles between halvings, a clear pattern emerges: the initial 70,000 blocks post-halving often usher in a bullish phase, succeeded by a bearish phase up to the 140,000th block, and culminating in a sideways market until the next halving at the 210,000th block.
Bitcoin’s market dominance is also subject to cyclical fluctuations. Since 2016, its dominance has dipped below 40% during bearish phases and soared to around 70% during bullish periods, significantly influencing the broader cryptocurrency market.
The average drawdown observed between halvings is approximately 80%. Currently, in the sideways phase of the third cycle, projections based on the intersection of the 210,000th block and the lower logarithmic regression boundary suggest a valuation of $30,000 per Bitcoin. The forthcoming era could witness a peak of $150,000, with an 80% drawdown positioning the potential low at $55,000 during the bearish phase, commencing 486 days after the halving.
Where are we Today?
Recent market analyses align with these projections, indicating a minor retracement a month after the 2024 halving, followed by a significant rally to new heights. Analysts advise caution as the market nears the halving event, with some predicting a pre-halving sell-off. Despite short-term volatility, the long-term outlook for Bitcoin remains bullish, with predictions of a new all-time high price in each 4-year period between Halving dates.
The only indicator to consider: The MVRV Ratio and Z-score
The MVRV ratio was created by Murad Mahmudov & David Puell hot on the heals of the invention of the Realized Cap concept by the Coinmetrics team of Nic Carter and Antoine Le Calvez. Realized Cap is an alternative approach to Market Cap as a measure of network valuation. Rather than using the last traded price and multiplying by the coins in circulation as seen in Market Cap, Realized Cap approximates the value paid for all coins in existence by summing the market value of coins at the time they last moved on the blockchain. MVRV is simply the ratio comparing the two, i.e. MVRV = Market Cap / Realized Cap. It’s useful for getting a sense of when the exchange traded price is below “fair value” and is also quite useful for spotting market tops and bottoms (Source: Coinmetrics.com).
The MVRV ratio is calculated by dividing the total bitcoin market value (MV) by its realized value (RV). Therefore, the metric represents the extent in which the current bitcoin market valuation is overextended beyond (values >1) or actually at a discount (values <1) compared to the holders’ aggregated cost base.
From the MVRV ratio we obtain the MVRV z-score, which first calculates the difference between the total bitcoin market value and its realized value, and then divides that by the standard deviation of the market valuation — a common statistical procedure called “standardization.” The MVRV z-scores, therefore, represent the number of standard deviations that each bitcoin market valuation is increased or decreased against its realized value (Remember z-score >1 means overextended and z-score <1 discount)
What do indicators say?
We are currently at the dusk of the 3rd halving era which occurred on May 11th 2020, more precisely the END of the sideways phase.
The MVRV ratio is at 2.24 giving sights of a Fair Value.
Historically, Values over '3.7' indicated price top and values below '1' indicated price bottom.(Source: CryptoQuant)
(It is crucial to note that these insights are for educational purposes and should not be considered financial advice. The cryptocurrency market is inherently volatile, and while historical data can provide guidance, it does not guarantee future performance).
