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In last week’s newsletter BTC price had retraced to $112k and had just tested the previous high. We noted that there was a lot of panic in the market, but actually, we saw this as a strong support level. Sure enough, that level held as support and BTC has rebounded back up with a vengeance!
Figure 1: BTC making a new all-time-high.
BTC price has now surpassed the recent range zone and is climbing above $120,000. In doing so, it is breaking above the 0.618 fib level on the fib extension shown on the chart below.
The next target is the 0.786 fib level at $127,000.
Figure 2: Past month performance of BTC.
The Big Story: Is The Market Too Hot?
With BTC making new all-time highs, people are once again asking if the market is too hot and whether we may be nearing the end of the cycle.
Let’s take a look at a handful of Bitcoin Magazine Pro metrics to get a quick sentiment check.
The Fear & Greed Index is certainly not one of the most scientific metrics available, but it does give a broad sense of general market sentiment. Previous cycles have topped out only after a sustained period of Extreme Greed (dark green).
Figure 3: Fear & Greed Index.
So far, on this latest run up the Index has only reached Greed level, with a current score of 70.
A much more definitive indicator than Fear & Greed, as it is based on actual behaviour.
What are Funding Rates? Bitcoin funding rates are periodic payments exchanged between long and short traders in perpetual futures markets to keep the contract price in line with the spot price. A positive funding rate means longs pay shorts (indicating bullish sentiment), while a negative rate means shorts pay longs (indicating bearish sentiment).
When traders are overly bullish (green bars on the charts) it has historically aligned with major highs for BTC. See March last year when the green bars spiked at the local high.
Figure 4: Bitcoin Funding Rates.
Right now, Funding Rates are less than 0.02% at a very stable level. This suggests that BTC can move higher without the need for overleveraged traders to be wiped out by any sharp price retracements. This is bullish.
One of our favourite indicators at Bitcoin Magazine Pro, again because it is based on actual market participant behaviour.
The MVRV Z-Score compares Bitcoin’s market value (current market cap) to its realized value (value based on the price when each coin last moved) and normalizes the difference using standard deviation.
When the Z-score is very high, it suggests the market value is far above the realized value, often indicating overheated conditions near a cycle top.
Figure 5: MVRV Z-Score.
With a current score of just 2.5, this metric suggests that BTC could still move up a lot higher before this cycle is over. Historically, previous cycles have topped out once the Z-Score (orange line) moves above 6 towards the upper red zone.
This tool combines multiple onchain metrics such as Coin Days Destroyed and Terminal Price into one single master metric. It is a useful shorthand way to visualise where BTC is in its cycle.
Right now, BTC price is sitting right in between the Fair Market Value (purple line) and the Aggressively Valued (orange line).
Figure 5: MVRV Z-Score.
Previous cycles have only topped out after BTC price has reached the Over Valued (red) line, which is currently at $246,118. There is no guarantee that price will reach such levels this cycle, but it is still some way off even the Aggressively Valued (orange) line, which is at $152,861 and climbing.
In summary, there is a lot of data to suggest that BTC still has a lot of potential to climb higher in the coming weeks and months. With both institutions and retail still coming on board, the future looks bright.
You can dig into the data for yourself here at Bitcoin Magazine Pro.
Speak again soon!
Bitcoin Magazine Pro Team.