Is there a bubble in the current encryption market? What are the real needs of investors?

Author: Axel Adler Jr, Source: Author’s Blog; Translation: Tao Zhu, Golden Finance

Today, we will discuss the following topics:

1. Market review.

2. Why is it said that the Bull Market is not over yet?

3. What is the real demand for expensive Tokens?

4. Integrated completion and support level.

5. Conclusion.

Throughout the week, the BTC trading price remained between $61-56K USD without forming a clear trend. This was essentially a very calm trading week. The resistance level is the 200-day moving average of $68.2K USD, and the price failed to hold at that level.

An interesting event this week is the news from Dubai, where Dubai acknowledges that Cryptocurrency is an acceptable way to pay wages, indicating the increasing adoption of Digital Money.

Another important event involves ETFs: BlackRock’s Assets Under Management exceeded that of Grayscale, thanks to Grayscale’s outflows and BlackRock’s inflows. In addition, Grayscale has appointed a new CEO. If you don’t know, former CEO Michael Sonnenshein launched a BTC trust fund that attracted a total of 653K BTC in investment. The problem is that customers don’t know there are smart money players in the market who are willing to sell expensive Crypto Assets to Newbies. As a result, some customers have to wait four years to realize profits. In fact, the four-year compound annual growth rate of BTC has never been less than 24%, but the fact that investors in the fund have to wait four years is quite astonishing.

Is the Bull Market Over?

When the demand for buying expensive tokens is less than the supply of tokens for sale, the bull run will end. Let’s look at the data to determine if the current market situation can be considered the end of a bull run cycle.

The first thing we need to understand is whether there is a bubble in the market right now.

Bubble and Crash Market Structure Indicators show that the first bubble of this cycle formed at the level of $73,000. The current value has dropped to 1.02, which is the baseline, indicating that the market is not in a bubble. When the Market Caprise of BTC rises faster than its actual Market Cap, a bubble is formed, which essentially reflects speculative interest. In other words, at this time, many investors buy BTC at high market prices due to fear of missing out (FOMO).

The next indicator that helps us to understand whether the Bull Market has ended is the standard deviation of MV/RV, which is smoothed by two MAs within 30 days and 365 days.

In the chart, we can see that the current Bull Market cycle is developing quite steadily, without major anomalies or a sharp pump. The 30DMA MVRV Z-Score is 1.8, indicating the smallest degree of overvaluation of BTC compared to the annual average of 1.6. We can see that in previous cycles, the 30DMA MVRV Z-Score rose to above 5, which is usually accompanied by price peaks and subsequent adjustments. This confirms that the current Bull Market cycle is in an active phase, and as long as this indicator does not reach extreme levels that may indicate significant adjustment risks, the market can be considered bullish.

How much is the real demand for Crypto Assets?

First, let’s take a look at the behavior of experienced investors. We can see that when BTC reaches $73,000, the activities of long-term holders peak. This means that at this level, a considerable number of experienced investors decide to take profits, causing the indicator to rise to 23%.

Currently, the activity of experienced investors has dropped to 4%. This indicates that despite the current high price level, long-term holders are not eager to sell their assets. This may be a sign of confidence in further rise and expectations of future price pump.

Let’s see how many people are willing to sell BTC on the exchange. The value of the exchange traffic multiple indicator has dropped from 1.73 to 0.8, indicating a significant decrease in sales activity on the exchange.

All this tells us that the current market is facing little downward pressure, and investors are not eager to sell assets on exchange.

Let’s evaluate the demand by looking at the quantity of Tokens purchased at a price of 598,000 USD higher than the current market price and currently in a loss.

The loss supply indicator shows the total amount of BTC in loss (as a percentage). The current value is 22%, which means that 22% of all BTC was purchased at a price higher than 598,000 USD, approximately 4.3 million BTC. Such a large number of token transactions have occurred in the past five months. Can this be seen as sustainable demand for previously expensive tokens? Obviously yes.

Finally, let’s take a look at the indicators for realized profit and loss.

The current value is 3.4 points, which actually means a loss-making sale. A further drop of 3.4 points on this indicator will trigger an orange alert and define it as a local bottom. Therefore, the 365-day SMA average purchase price of BTC can be viewed as a strong support level for continued consolidation.

Conclusion

We are about to enter the final stage of integration, and in my opinion, the integration progress is very smooth. We see that the previously expensive Token now has demand, and it happens within the framework of the Bull Market cycle. We see that the current realization of Token is at breakeven or loss, which indicates that the integration is about to end. We also see that there is no bubble in the market, the standard deviation of the MV/RV indicator shows that the current price of BTC is not Overbought. We also understand that the bearish pressure on the exchange is small, and the 365-day SMA average purchase price of BTC ($50,000) may act as a strong support level when the integration ends.

Wish you good luck in the upcoming trading week!