Coinworld reported:
Currently, the Bitcoin market is in an counterintuitive position – most short-term holders are still in loss, but the average price is still twice as high as before. At the same time, many volatility indicators are severely affected, indicating that larger market fluctuations may be on the horizon.
Summary:
Although the price of Bitcoin has not seen an increase, a considerable number of investors are still profiting in the market. Short-term holders, on the other hand, have borne the majority of market losses.
By combining on-chain pricing models and technical indicators, this article will define and explore a series of possible scenarios for the future development of the market.
Volatility indicators continue to face unprecedented obstacles, indicating that investors currently have no strong investment intentions, and also suggesting that future market volatility may intensify.
Market profitability remains strong:
As the price of Bitcoin dropped to $60,000, fear and pessimism spread throughout the market.
However, from the MVRV ratio, the overall profitability of investors remains strong, with an average profit of more than double per Bitcoin. This ratio typically marks the boundary between the “enthusiasm” and “euphoria” phases of a bull market.
Figure 1: Bitcoin’s MVRV ratio.
Combining indicators to determine market expectations:
Since Bitcoin reached its all-time high in March, its price has been consolidating within the range of $60,000 to $70,000. The market lacks a clear trend, and investors are hesitant.
To determine the current position in the price cycle, we use a simplified framework to analyze the market:
Deep bear market: Trading price below the actual price.
Early bull market: Trading price between the actual price and the true market mean.
Bullish enthusiasm: Trading price between the all-time high and the true market mean.
Bullish euphoria: Price higher than the previous all-time high.
Currently, after several brief periods of entering the euphoria phase, the bull market has fallen back to the level of the previous enthusiasm phase. The average cost basis of active investors is currently around $50,000, which is also the true market mean at the moment.
If the macro bull market continues, $50,000 is still the key price threshold to keep the market excited.
Figure 2: Relationship between realized price, true market mean, and previous all-time high.
Analysis of short-term holder behavior:
The behavior of short-term holders has a significant impact on market volatility. By overlaying their cost basis with ±1 standard deviation levels, we found:
A large amount of unrealized profit indicates that the current market may be overheated, with the current value at $92,000.
The breakeven line for the short-term holder group is $64,000. At this point, the spot price is lower than this line, but the market has an upward trend.
A large amount of unrealized loss indicates that the current market may be oversold, with the current value at $50,000. This is consistent with the true market mean and acts as a critical point for the bull market.
Figure 3: Analysis of short-term holder behavior.
Analysis of the profitability of short-term holder subgroups:
Currently, the subgroups with holding periods of 1 day to 1 week, 1 week to 1 month, and 1 month to 3 months are all in loss. This indicates that the current consolidation range is not profitable for these short-term holders.
Among all short-term holders, the subgroup with a holding period of 3 months to 6 months is still the only subgroup with unrealized profits. Their average cost basis is $58,000, which aligns with the price low of this market correction, once again highlighting it as a key threshold worth paying attention to.
Figure 4: Detailed realized prices of short-term holders (holding periods from 1 day to 6 months).
Technical indicators analysis:
Mayer Multiple:
This indicator is widely used in market analysis and evaluates the ratio between the current market price and its 200-day moving average. The 200-day moving average is commonly used as a simple indicator to assess bullish or bearish momentum, and any upward (or downward) breakthrough of this indicator will become an important turning point in the market.
The current 200-day moving average is $58,000, which once again aligns with the on-chain pricing model.
Figure 5: Bitcoin’s Mayer Multiple.
URPD:
This is used to assess the concentration of Bitcoin supply near specific cost bases.
Currently, there is a large concentration of Bitcoin suppliers between $60,000 and the previous all-time high price, and the spot price is hovering around the lower limit of these suppliers’ prices. This also aligns with the cost basis model of short-term holders.
Currently, approximately 2.63 million Bitcoins (13.4% of the circulating supply) are within the $60,000 to $70,000 range. Therefore, even a slight price fluctuation can significantly impact the profitability of investors’ portfolios.
Overall, this also indicates that investors will be extremely sensitive to any further decline after the price drops below $60,000.
Figure 6: Bitcoin’s URPD (adjusted by entities).
Future volatility expectations:
After months of small fluctuations, the volatility of the market has decreased significantly within various rolling time windows. To illustrate this phenomenon, we introduce a simple model to find the calm before the storm – this decrease usually indicates that volatility may intensify in the future.
This model evaluates the 30-day change in actual volatility within 1 week, 2 weeks, 1 month, 3 months, 6 months, and 1 year time ranges. When this change is negative in all time windows, it indicates a decrease in market volatility.
Figure 7: Bitcoin market volatility measure.
Another method to assess market volatility is to calculate the percentage difference between the highest and lowest prices in the past 60 days. From this indicator, we can see that market volatility has decreased to rare levels. In the past, this situation often occurred after a long period of consolidation and before significant market fluctuations.
Figure 8: Bitcoin price 60-day high and low values.
Finally, we can use the seller’s risk ratio to further evaluate market volatility. It assesses the absolute value of realized profits and losses locked in by investors relative to the asset’s market capitalization. We can discuss this indicator under the following framework:
High seller’s risk ratio indicates that investors are making significant profits or losses when selling Bitcoin. This situation often occurs after periods of high volatility, indicating that the market needs to find a new balance.
Low seller’s risk ratio indicates that most of the profits and losses from selling Bitcoin are small, indicating that the market has reached a certain level of balance. At this point, the “profit and loss potential” within the current price range has been exhausted, and the market environment does not show significant volatility.
It is worth noting that the seller’s risk for short-term investors has reached a historical low – only 274 out of 5,083 trading days (5%) have shown lower levels. This indicates that a certain level of balance has been established during the Bitcoin price consolidation period and suggests that volatility may intensify in the near future.
Figure 9: Short-term holder’s seller’s risk ratio.
Summary:
Currently, the Bitcoin market is in a counterintuitive position – despite the price being 20% lower than the all-time high, investors are not enthusiastic. The average unrealized profit per Bitcoin is twice as high. However, new buyers are unexpectedly mostly in a loss.
In this article, we analyze this using a combination of on-chain and technical indicators and come up with three key price ranges that will reignite investor interest.
If Bitcoin falls below the range of $58,000 to $60,000, it will result in a significant number of short-term holders in loss and push the price below the 200-day moving average.
If it continues to hover between $60,000 and $64,000, the market will continue its previous consolidation trend.
If it manages to break through the $64,000 barrier, a large number of short-term investors will turn their losses into gains, and in this case, investor sentiment in the market may rise.
From the current spot price and on-chain indicators, volatility is decreasing within multiple time windows. Indicators such as the seller’s risk ratio and the 60-day price range have reached historical lows. This indicates that the current consolidation phase will not last long, and the market is about to enter a new price breakthrough in the next range.
