Bitcoin's Surging Rally Breakdown: Uncovering Major Divergence
On-Chain Metrics & Cycle Trends Revealed
Hello Bitcoiners!
We're witnessing a remarkable rally with Bitcoin breaking past $44,000. I'm eager to share some amazing insights with you this week! This newsletter is packed with top-notch charts to break down the current surge, so make sure you stay tuned.
Last week we discussed how Bitcoin was breaking through $38,000, we were at a 60% recovery (currently 69%), and how the Spot ETF deadline is functioning as a catalyst. If you want to revisit that discussion, you can find it here:
This week we’ll discuss: 👇
Value map: Bitcoin at fair price.
On-Chain: Identifying similar rallies.
Cycle Analysis: comparing these rallies.
Insights: A major divergence!
Bitcoin at Fair Price!
The On-Chain Value Map shows Bitcoin has just outpaced the ‘Fair Price’ marker. I find this chart exceptionally insightful, as it not only captures cycle peaks and troughs but also considers the tightening of supply.
👆 View live chart at the Bitcoin Strategy Platform.
In each cycle, Bitcoin managed to return to the Fair Price level before each Halving event. While every cycle has its nuances, the current rally closely mirrors the 2016 pre-Halving surge. This time, we're ahead of the typical schedule. It's not as premature as the 2019 scenario, but the market conditions are distinctly different. That year involved an influx of new buyers, visible on-chain by observing Short-Term Holder supply. That year's excitement was short-lived, leading back to a bearish trend.
👉 Key insight: Historically, post-recovery over the Fair Price mark, Bitcoin has stayed above the Undervalued level, now at $28,000, except for the Covid anomaly.
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On-Chain: Identifying similar rallies
👆 View live chart at the Bitcoin Strategy Platform.
The Short-Term Holders' (STH) average purchase price is a reliable indicator of market trends. When prices are above the STH cost basis, indicated in green, it signals bullishness, and red suggests bearishness (more background info here). I've pinpointed the part of the cycle leading up to the Halving for clarity.
The bottom section of the chart represents the distance between price and the STH cost basis using standard deviations. A second horizontal line is drawn at 0.5 standard deviations.
To be fair, reaching that level, my initial expectation was a reset to the STH cost basis, as this level historically proved to be a resistance level during this phase of the cycle. I was wrong. Instead, we broke above it, which in hindsight isn’t that strange, considering we eventually broke above it in every cycle before reaching the Halving.
👉 This pattern allows us to compare the current rally with all previous instances, marked by the blue arrows.
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You've made it to a pivotal point 👊! The insights just ahead are crucial and could redefine your market strategy. Don't miss the revealing details in the next section—continue reading.
We’ll take a look at two more charts, comparing and overlaying the identified rallies and pointing out a major divergence!