5 Key Indicators to Watch for a Crypto Rally: Essential Insights for Bitcoin (BTC) and Ethereum (ETH) Traders

• Recent analyses suggest that despite a horizontal trend in the crypto market over the past three months, at least five onchain data points indicate the beginning of a potential bull market.
• Since the end of February, the market cap of cryptocurrencies has hovered around $2.5 trillion, leaving market observers uncertain whether the cycle has concluded.
• According to an article shared by analyst ELI5 on TLDR on May 19th, these five onchain indicators are signaling an upcoming bull market.

This detailed analysis explores emerging trends in the cryptocurrency market, focusing on key onchain data that could signal the onset of a new bull market phase.

Bitcoin Dominance Exceeds 56%

Historically, crypto bull markets begin with an increase in Bitcoin’s dominance, as most traders would have sold their altcoins during the previous bear market cycle. However, the current scenario does not reflect this as Bitcoin’s dominance slightly exceeds 56%, according to TradingView, maintaining a market share above 50% since October 2023.

Critical Data for Bitcoin’s Peak

According to LookIntoBitcoin charts, the Bitcoin MVRV Z-Score, which compares the asset’s current market value or capitalization to its historical average value, typically peaks around 6 during cycle peaks. Currently, it is less than half of this value and has not exceeded 6 since March 2021.

The Growing Importance of Mined Bitcoin Quantity

The Puell Multiple, another metric aligned with cycle peaks, calculates the daily value of mined Bitcoin divided by this value’s annual moving average. As per Coinglass, the Puell Multiple fell below 1 following the halving on April 20th. Peaks above 3 usually coincide with cycle peaks, reaching only 2.4 during the mid-March 2024 price pump.

Movements of ‘Diamond Hands’ Are Significant

Charts indicating how much BTC is held by so-called HODL investor groups, known as ‘diamond hands’, can also signal a bullish trend for Bitcoin. The Realized Cap HODL Waves provide a macro view of how much Bitcoin is held by recent buyers compared to a while ago. A decline in peaks in younger bands suggests that selling pressure has exhausted, potentially clearing the way for further increases.

Miner Revenues Will Be Decisive

The fifth bullish element from onchain data is the miner revenue per hash, which shows how much money miners are making from transactions. Although the network difficulty tends to decrease occasionally, ELI5 noted that the last two peaks came at $0.3 per terahash per second during previous market cycle peaks.

Conclusion

This analysis highlights critical onchain data that could indicate the beginning of a new bull market in cryptocurrencies. While some metrics suggest the market might be overheating and reaching a peak, others like the Puell Multiple and Bitcoin dominance suggest a different story. Investors should conduct their research and consider multiple data points before making decisions.