Analyzing the Current Bitcoin Market Cycle: Where Are We?
In a comprehensive analysis shared via X (formerly Twitter), Alex Thorn, the Head of Firmwide Research at Galaxy, delved into the intricacies of the current Bitcoin market cycle, answering the question “Where Are We In This Bitcoin Cycle?” As Bitcoin trades robustly around $62,000, with a notable spike to $64.000 yesterday, the crypto landscape is witnessing unprecedented dynamics, marked by a surge in ETF inflows, strategic acquisitions by corporate entities, and a palpable shift in investor sentiment towards digital assets.
Effectively, the bull runs of 2017 and 2020 hadn’t yet begun at this stage in Bitcoin’s supply schedule.
Alex Thorn highlights how different this cycle is compared to previous cycles. Looking at the data from previous halvings, he points out that 52 days before the second halving in July 2016, BTCUSD was at $455.22 (-59.86% from its all-time high). Similarly, 52 days before the third halving in May 2020, BTCUSD was at $6,174 (-68.56% from its all-time high). However, in the current cycle, 52 days before the fourth halving (scheduled for April 2024), BTCUSD is at $59,330 (-12.16% from its all-time high). This indicates that this cycle has already seen significant growth compared to previous cycles.
Why This Bitcoin Cycle Is Different
Central to Alex Thorn’s analysis is the record-breaking influx of capital into spot Bitcoin ETFs. He highlights that BTC ETFs took in a net $576 million of BTC on Tuesday February 27th alone, with BlackRock alone seeing $520 million of inflows. This significant movement of funds not only underscores the growing institutional interest in Bitcoin but also marks a pivotal moment in the cryptocurrency’s journey towards mainstream financial recognition.
Another important aspect of Thorn’s analysis is the strength of Bitcoin’s long-term holder base. He estimates that long-term holders hold about 75% of the total BTC supply, and these holders are still holding strong. This demographic plays a crucial role in stabilizing the market and buffering against volatility.
Thorn introduces the MVRV Z-Score as an analytical tool to understand Bitcoin’s market behavior. This metric compares Bitcoin’s market value to its realized value and offers insight into whether Bitcoin is overvalued or undervalued at any given point. Currently, the MVRV Z-Score is close to 2, indicating that Bitcoin is not yet at its peak. Previous cycle tops saw the metric spike to 8 (in 2021) or even above 12 (in prior halving cycles).
Thorn dispels concerns that the market is prematurely peaking and argues against the notion that we are “speedrunning the ‘cycle’.” He asserts that the advent of Bitcoin ETFs in the United States represents a transformative shift with far-reaching implications for Bitcoin’s price cycles and investor behavior.
The Spot Bitcoin ETF Effect
Alex Thorn emphasizes the transformative impact of Bitcoin ETFs on the market. He believes that we are just at the beginning of a significant shift in how Bitcoin is accessed and invested in, particularly by institutional investors. The untapped potential within the wealth management sector is substantial.
Growth opportunities for Bitcoin ETFs include:
- Wealth managers and financial advisors represent a primary net new accessible market for these vehicles.
- There is approximately $40 trillion of assets under management (AUM) across banks and broker/dealers that has yet to activate access to spot BTC ETFs.
- Registered investment advisors manage $9.3 trillion in AUM, cumulating to a total US Wealth Management AUM of $48.3 trillion as of October 2023.
Thorn speculates that the upcoming April round of post-ETF-launch 13F filings might reveal significant Bitcoin allocations by some of the largest names in the investment world. This development could create a feedback loop where new platforms and investments drive higher prices, attracting even more investment.
The implications of this feedback loop are profound. As more wealth management platforms offer access to Bitcoin ETFs, the influx of new capital could significantly impact BTC’s price dynamics, liquidity, and overall market structure. Bitcoin is transitioning from a speculative investment to a staple in diversified portfolios managed by financial advisors and wealth managers.
We Are Still Early
Alex Thorn’s analysis extends beyond immediate market indicators to the broader implications of Bitcoin’s integration into the financial mainstream. He anticipates a new all-time high for Bitcoin in the near term, fueled by factors such as ETF momentum, increasing acceptance of BTC as a legitimate asset class, and the upcoming halving event. Thorn believes that this is just the beginning and that Bitcoin has not yet reached its full potential.
At press time, BTC traded at $62,065.
Hot Take: The Exciting Future of Bitcoin
Alex Thorn’s analysis offers a bullish forecast for Bitcoin. He envisions unprecedented growth driven by technological innovation, regulatory evolution, and shifting global economic currents. Thorn believes that Bitcoin is prime time now and that things are just starting to get exciting. As the community stands on the cusp of the fourth BTC halving, Thorn’s insights capture the essence of a market at the threshold of a new era.
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