Bitcoin trades sideways for 4 months, but why isn’t $73,000 a cycle top?

Written by JAY

Compiled by: Deep Tide TechFlow

Bitcoin has been hovering in the $60,000-$70,000 range for nearly 4 months.

While this is frustrating, it’s actually not uncommon. Usually after a halving event, we see the market enter a period of downturn. If we look back at the 2016 and 2020 halving cycles, we can see similar consolidation phases before entering the so-called “banana zone”, the final parabolic rise phase.

However, we cannot just be satisfied with "that's how it was in the past", but should try to analyze the current market conditions in order to learn from them and even profit from them.

"What about other cryptocurrencies? What about airdrops? What about ETH ETF?"

These issues will be discussed in future articles, this article mainly focuses on Bitcoin.

On the surface, if trying to answer why there is a large supply around $70,000, the simplest and most obvious answer may be:

• A lot of money came in early before the halving event;
• Miner income halved, Forced Selling;
• US Tax Factors;

We could list countless reasons, but it makes more sense to look at some objective indicators.

Market Value and Realized Value (MVRV).

This is the ratio between the weighted average purchase price of Bitcoin (i.e. the price at the time of the last move) and the current market price. Simply put, this reflects Bitcoin’s unrealized profits.

MVRV peaked in March at a ratio of 2.75, meaning that when Bitcoin was priced at $73,100, the average purchase price was $26,580. While this metric is not entirely accurate (for example, a centralized exchange may not move coins but simply update database entries), it usually rises in tandem with market price peaks. At some point, people need to take profits, right?

Another interesting metric is the change in long-term holder positions, defined as wallets holding Bitcoin for more than 155 days. Tops usually form when these holders complete selling, while bottoms form when they begin buying. A sharp increase in selling is evident from the end of January to the end of March. What’s more, they also started buying again.

Finally, considering that Bitcoin is priced in USD, it is also crucial to watch the USD supply. How much “money” is flowing in the market? More importantly, is this number increasing or decreasing? How is the speed? Is it accelerating or decelerating?

I think this chart says it all - the growth rate of global M2 (an important factor in global liquidity) has slowed down significantly since late March/early April. Markets are forward-looking and if the outlook for M2 slows, markets will expect USD to strengthen relative to cryptocurrencies (all else being equal).

In addition to this, there are many other signals:

Coinbase jumped 106 spots in the rankings in one day (they got a lot of app downloads).

Bitcoin ETF inflows peaked at $1.045 billion before slowing down sharply.

Lots of very positive regulatory news but increasingly weak price follow-through.

Miners sold aggressively during the post-halving downturn.

Selling at tops (including local tops) is always difficult because they tend to last longer (or shorter) than we expect and emotion makes it difficult to remain objective. In addition, the market can also sway us, we will be cautious at the beginning of the breakthrough, then we will be envious of those who make more than us (buy memes, increase leverage), and finally try to copy and "catch up" to the end.

The good news is that I don’t think this is a cycle top (if the concept of a cycle top still exists in the context of ETFs etc.). As I mentioned at the beginning, I think this is fairly typical in the weeks and months following a halving. Each cycle is obviously different, but I think the basic principles are roughly the same:

• There can only be so much unrealized profit in the system;
• Selling by long-term holders forms the top (and buying forms the bottom);
• USD supply Increase or decrease speed;

These factors will manifest themselves in different ways depending on the positioning of the participants.

I think this is unlikely to be a cycle top. While it's hard to say exactly when we'll get another move higher, I think we're closer to the end of this range than we were to the beginning (hopefully to the upside).

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