- The latest Capriole Investments’ “Bitcoin Update” addresses current Bitcoin trends through the analysis of various on-chain indicators.
- Founder and CEO Charles Edwards provides insights regarding the potential Bitcoin cycle top.
- “Never before has Bitcoin broken a new all-time high and had two retests instead of printing new highs,” states Edwards, signifying possible market weakness.
Discover the compelling insights from Charles Edwards’ detailed analysis of Bitcoin’s latest on-chain metrics and what it could mean for the future of cryptocurrency.
Bitcoin On-Chain Data Analysis
#1 Supply Delta + 90 Day CDD: By analyzing supply movements and coin destruction days, these metrics highlight cycle tops. Recent data suggests a rounded peak after a steep rise, which historically indicates market peaks. Edwards classifies this as bearish, pointing towards a downturn in supply dynamics.
#2 Long-term Holder Inflation Rate: A metric historically indicating cycle tops when reaching a 2.0 threshold. It has risen from 0.5 in April to 1.9, suggesting long-term holders might start selling, another bearish signal.
#3 Hodler Growth Rate (HGR): This measures the growth of long-term Bitcoin holders. A stagnation in this rate often precedes market peaks. The HGR hasn’t reached new highs in over six months, aligning with past cycle peaks and thus is marked bearish.
#4 Bitcoin Heater: Evaluating funding, basis, and options extremes, this metric currently shows no significant exuberance, standing neutral due to the absence of new leverage.
#5 Dynamic Range NVT: This valuation metric, comparing transactional volume to market cap, remains neutral. Recent innovations like Ordinals and Runes increased on-chain activity but did not distort overall market balance.
#6 On-chain Transaction Fees: High fees often indicate peak demand followed by declines. Despite occasional spikes, current fees mirror April’s decline. This metric remains neutral but is worth monitoring closely.
#7 Net Unrealized Profit/Loss (NUPL): Positioned just below the euphoric zone at 74%, this suggests most market participants are profitable but not excessively so, making this metric neutral.
#8 Spent Volume 7-10 years: A surge in spent volume from older coins indicates potential sell-offs by long-term holders. The transaction of 138,000 Bitcoin on May 28 primarily from Mt. Gox distributions is considered bearish.
#9 SLRV Ribbons: Showing a bearish crossover for the first time this year, this metric reflects a concerning trend, adding to the bearish outlook.
#10 Dormancy Flow: High dormancy flow reflects the average age of spent coins, similar to peak levels in 2017 and 2021. This year’s significant peak points towards a probable cycle top, marked as bearish.
#11 Percent Addresses in Profit: Over 95% of addresses being profitable often precedes a market peak. After recent high and decline, this indicator turns bearish, signaling potential profit-taking by investors.
#12 Mayer Multiple: Although peaking at 1.9 in March, it remains below the 2.5 threshold indicating major cycle tops. Currently at 1.0, it reflects a neutral market.
#13 US Liquidity: The correlation between liquidity and Bitcoin price is pivotal. Persistent downtrend in liquidity is concerning, aligning with a bearish outlook.
What This Means For The Bitcoin Cycle
Of the thirteen metrics analyzed, eight show bearish trends, five are neutral, and none are bullish. This indicates a possible cycle top and a critical juncture for Bitcoin. Edwards notes, “I won’t lie, I find this on-chain data hard to believe. I am surprised by the count of bearish signals for being just two months post halving.”
Despite the bearish stance from on-chain metrics, Edwards emphasizes the importance of considering technical patterns and broader market behavior. Bitcoin is currently above the $58K support level, with a potential Wyckoff Accumulation pattern on the daily chart suggesting some bullish potential.
Mixed signals require cautious optimism and rigorous risk management. “Fundamentals look bearish, but technicals are still bullishly skewed. That leaves ambiguity here. All of the bearish top signals could be the result of typical summer months inactivity. Or perhaps this cycle will be a bit more like 2013 with a double top or some hybrid mid-cycle grind that we must go through now given we are playing in the big league with TradFi today,” Edwards remarked.
Conclusion
The analysis presents a complex picture with a predominance of bearish on-chain signals, suggesting a potential cycle top for Bitcoin. However, technical patterns offer some bullish prospects. Investors should remain vigilant and adopt cautious optimism, particularly during this ambiguous phase where fundamentals and technical indicators provide mixed signals.
