Analysis of Bitcoin’s Cycle Top
After a promising breakout above $65.5K and touching $70K, Bitcoin faced a sharp reversal, hinting at a potential cycle top. Charles Edwards, in his latest “Bitcoin Update,” delves into the on-chain indicators to determine if the current state indicates the top of the Bitcoin cycle. Let’s examine these indicators to grasp the situation better.
Bitcoin On-Chain Metrics Breakdown
#1 Supply Delta + 90 Day CDD:
– Indicates supply movements and coin destruction days
– Historically corresponds with market peaks
– Current data shows a bearish trend, signaling a potential downturn
#2 Long-term Holder Inflation Rate:
– Predictor of cycle tops with a threshold of 2.0
– Recent rise from 0.5 to 1.9 indicates nearing critical level
– Implies long-term holders becoming more likely to sell
#3 Hodler Growth Rate (HGR):
– Measures net growth of long-term holders
– Decline or plateau often precedes market tops
– Alignment with historical precedents marks it bearish
#4 Bitcoin Heater:
– Analyzes funding, basis, and options
– Indicates a neutral stance with no market exuberance
#5 Dynamic Range NVT:
– Compares on-chain transaction volume to market cap
– Recently moved out of the value zone, remains neutral
What Does This Portend for Bitcoin’s Cycle?
Out of the thirteen metrics considered, eight are bearish, five are neutral, and none are bullish. This prevalence of bearish signals indicates a potential cycle top for Bitcoin. Despite this, technical patterns and broader market behavior suggest the market still holds bullish potential, albeit with mixed signals requiring cautious optimism and vigilant risk management.
Edwards’ Perspective on Bitcoin’s On-Chain Activity
Despite the bearish on-chain metrics, Edwards underscores the need to factor in technical analysis and market dynamics. While fundamentals lean towards bearishness, technicals display a bullish bias. This ambiguity calls for careful observation, especially considering the possibility of atypical summer inactivity affecting top signals. Edwards looks ahead to a potentially brighter outlook in Q4 and beyond for Bitcoin returns post-halving.
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