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Driven by the regulatory tailwinds brought about by Trump's election, BTC has successfully broken through its historical high. As market attention continues to rise, various key indicators suggest that the strong momentum of this bull market is likely to persist.
As we predicted in September, BTC price experienced a highly volatile upswing after the election. Now, BTC has entered uncharted territory without technical price resistance, and we believe the next stage of the bull market has just begun. This pattern is similar to 2020, where BTC price doubled by the end of the year and further increased by around 137% in 2021. With the government's significant shift in its supportive stance towards BTC, investor interest is rapidly growing. Recently, we have seen a surge in investment inquiries, as many investors realize their allocations in this asset class are clearly insufficient. While we are closely monitoring the market for signs of overheating, we reiterate our price target of $180,000/BTC for this cycle, as the key indicators we track continue to show bullish signals.
BTC Price Trend
Market Sentiment
BTC's 7-day moving average (7 DMA) has reached a new all-time high of $89,444. On election night on Tuesday, November 5th, BTC surged around 9% to a new all-time high of $75,000. This is consistent with our previous observation that BTC price tends to rise when the likelihood of a Trump victory increases. Trump explicitly promised to end the SEC's "enforcement-centric" regulatory approach and make the US the "capital of crypto and Bitcoin" during his campaign.
After Trump's election as president, regulatory headwinds have now turned into tailwinds. Trump has already started appointing crypto-friendly officials in the executive branch, and with the Republicans controlling the unified government, the likelihood of relevant supportive legislation being passed has increased. Key proposals include plans to establish a national BTC reserve as well as rewriting crypto market structure and stablecoin-related legislation, with FIT21 expected to be rewritten in market and privacy-friendly terms, and new stablecoin drafts allowing state-chartered banks to issue stablecoins without Federal Reserve approval.
As countries like the BRICS are exploring BTC and other alternatives to bypass US dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for the US to project the dollar globally. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the US can maintain the global influence of the dollar and leverage the faster adoption of cryptocurrencies in emerging markets, which have a voracious demand for financial services, hedging local currency inflation, and DeFi.
We expect the SAB to be repealed in the first quarter of Trump's term, either by the SEC or by Congress, which will prompt banks to announce crypto custody solutions. If Gary Gensler has not yet resigned, Trump may fulfill his promise to replace the SEC chair with a more crypto-friendly candidate and end the agency's notorious "regulation by enforcement" era. Furthermore, by 2025, the US will revise its ETH ETF to support staking, approve Solana's (SOL) ETF 19b-4 proposal, and creating and redeeming ETFs in-kind will make these products more tax-efficient and liquid. Given Trump's prior acknowledgment of the energy-intensive commonalities between BTC mining and AI, energy regulations are expected to be relaxed, making baseload energy (such as nuclear) cheaper and more abundant, thereby propelling US global leadership in energy, AI, and BTC.
This election marks a bullish inflection point, reversing the capital and employment outflows caused by the previous hawkish policies. By unleashing entrepreneurial dynamism, the US is poised to become the global leader in crypto innovation and employment, transforming cryptocurrencies into a key domestic growth industry and a vital export product for emerging markets.
BTC Dominance
The 7-day moving average of BTC dominance (a metric measuring BTC market cap relative to the total crypto market cap) has risen 2 percentage points this month to 59%, the highest level since March 2021. While this uptrend from the November 2022 low of 40% may continue in the short term, it is likely to peak soon. In September, we pointed out that a Harris victory could boost BTC's dominance due to a clearer regulatory status as a commodity. In contrast, Trump's pro-crypto stance and his expanded cabinet team are likely to drive broader crypto market investment. As BTC reaches new highs in a crypto-friendly regulatory environment, the wealth effect and reduced regulatory risk are expected to attract native capital and new institutional investors to DeFi, boosting the returns of smaller projects in the asset class.
Regional Trading Dynamics
At first glance, Asian market trading hours appear to have seen a significant increase in BTC holdings by traders this month, contrary to the recent trend of Asian traders typically being net sellers while European and US traders are net buyers. However, the BTC price surge on election night occurred during Asian trading hours, likely due to a large number of US investors trading around the election. This specific event makes it difficult to fully attribute such price movements to regional dynamics. Consistent with historical behavior, traders in the US and European trading hours have continued to increase their BTC holdings, maintaining the price performance trend observed in October.
Source: glassnode, 11/18/24 (Past performance does not guarantee future results.)
Key Indicators
To assess the potential upside and duration of this bull market, we analyzed several key indicators to gauge the market's risk level and potential price tops. This month, our analysis starts with perpetual futures (perps), where the performance of funding rates provides insights into market sentiment and helps measure the likelihood of overheating.
BTC price typically exhibits signs of overheating when the 30-day moving average (30 DMA) of perpetual funding rates exceeds 10% and persists for 1 to 3 months.
BTC Average Returns vs. Perpetual Funding Rates (January 4, 2020 - November 11, 2024)
BTC Price Performance When 30 DMA Annualized Perps Fees Exceed 10%
Source: glassnode, as of November 12, 2024
Starting from April 2020, we analyzed the periods where the 30-day moving average perpetual futures funding rates exceeded 10%. These periods had an average duration of around 66 days, with an average return from open to close of 17%, although the duration of individual periods varied significantly. The only exception was a single-day spike on June 18, 2024, reflecting short-term market sentiment. Other instances persisted for weeks, highlighting structural bullish sentiment, which typically leads to significant short-to-medium-term gains.
For example, the high funding rate phase that began on August 31, 2021 lasted for 23 days, followed by a 28-day cooling period, and then resumed for another 51 days on October 19. If this brief interval is included, the total duration of the high funding rate in 2021 reached 99 days. Similarly, the current high funding rate phase that began on November 12, 2024 lasted for 80 days, followed by a 19-day interval, and then another 69-day high funding rate period, totaling 168 days, comparable to the 186 days from November 11, 2020 to May 21, 2021. It is worth noting that when the funding rate exceeds 10%, the average returns within the 30-day, 60-day, and 90-day time frames for BTC purchases are higher than the days with lower funding rates.
However, the data shows that there is a pattern of underperformance over a longer time frame. On average, BTC purchased on days when the funding rate exceeds 10% starts to lag the market from 180 days onwards, and this trend becomes more pronounced within the 1-year and 2-year time frames. Given that market cycles typically last around 4 years, this pattern suggests that sustained high funding rates are often associated with cycle tops and may serve as an early signal of market overheating, indicating a higher risk of long-term downside.
BTC Cycle Analysis
Source: glassnode, as of November 13, 2024
As of November 11, BTC has entered a new phase, with the funding rate once again exceeding 10%. This shift suggests stronger short-term to medium-term momentum, as historically, higher funding rates have been associated with higher 30-day, 60-day, and 90-day returns, reflecting increased bullish sentiment and demand. However, as the funding rate remains elevated, we may depart from the stage that is equally favorable for long-term (1-2 year) returns. Given the current supportive regulatory environment for BTC, we expect another high-performance period to emerge, similar to the 260% growth driven by the sustained >10% funding rate over 186 days after the 2020 US election. With BTC currently trading around $90,000, our $180,000 target price remains viable, reflecting the potential cycle return of around 1,000% from the cycle bottom to the peak.
Higher 30-day moving average (DMA) relative unrealized profit (RUP) levels (>0.60 and 0.70) have historically often signaled the top of BTC prices.
BTC Average Earnings vs. 30-day Moving Average Relative Unrealized Profit (RUP) (November 13, 2016 - November 13, 2024)
Source: glassnode, as of November 13, 2024
BTC Average Earnings vs. 30-day Moving Average Relative Unrealized Profit (RUP) (November 13, 2016 - November 13, 2024)
Source: glassnode, as of November 13, 2024
Next, we focus on the Relative Unrealized Profit (RUP), which is another important metric for assessing whether the BTC market is overheated. RUP measures the proportion of the total BTC market capitalization that is comprised of unrealized gains (i.e., paper profits that have not yet been realized through selling). As BTC prices rise above the average purchase price of most holders, this metric rises, reflecting more of the market entering a profitable state and thus exhibiting bullish sentiment.
Historically, high 30-day moving average (DMA) RUP levels (especially above 0.60 and 0.70) have often signaled strong and potentially overheated market sentiment. As shown by the red zones in the charts, when the 30-day DMA RUP exceeds 0.70, it often coincides with market tops, as the high proportion of unrealized profits triggers more profit-taking. Conversely, when the RUP level falls below 0.60, it indicates more favorable market conditions for long-term buying, with historical data showing higher 1-year and 2-year returns for purchases made below this threshold.
Analysis of the past two market cycles shows that 30-day DMA RUP levels between 0.60 and 0.70 typically offer the highest short-term to medium-term returns (7 days to 180 days). This range usually reflects the mid-stage of a bull market, where bullish sentiment is rising but has not yet reached excessive levels. In contrast, when the RUP exceeds 0.70, returns across all time frames exhibit a negative correlation, reinforcing its role as a strong sell signal.
As of November 13, BTC's 30-day DMA RUP is around 0.54, but the daily value has exceeded 0.60 since November 11. According to our detailed data, the risk gradually increases when RUP approaches 0.70, emphasizing the importance of short-term trading within the 0.60 to 0.70 range. However, if the 30-day DMA RUP rises closer to 0.70, it may signal market overheating, warranting caution on long-term positions.
US Region "Cryptocurrency" Search Trends
Source: Google Trends, as of November 18, 2024
The search interest for "cryptocurrency" as a Google search term is an important indicator of retail investor interest and market momentum. Historical data shows that the peaks in search interest have typically coincided with the peaks in the overall cryptocurrency market capitalization. For example, the search interest reaching all-time highs in May and November 2021 were followed by significant market declines: a roughly 55% correction within about two months after the May peak, and a bear market of around 75% over the 12 months following the November peak.
Currently, the search interest is only 34% of the May 2021 peak, slightly lower than the 37% local peak observed in March 2024 (when BTC reached the highest price of the current cycle). This relatively low search interest suggests that BTC and the broader crypto market have not yet entered a speculative frenzy stage, leaving room for further growth without reaching the mainstream attention levels typically associated with market tops.
Coinbase App Store Ranking
Source: openbb.co, as of November 15, 2024
Similar to the Google search interest for "cryptocurrency," the Coinbase app store ranking is another important indicator of retail investment interest. On March 5th, after BTC price surged around 34% in 9 days and retested the 2021 all-time high of around $69,000, Coinbase re-entered the top 50 app store rankings. Although BTC reached a new high of around $74,000 later that month, with price volatility subsiding into the summer doldrums and public attention shifting to the presidential election, retail interest waned. However, BTC's breakout on election night reignited retail enthusiasm, with Coinbase's app store ranking soaring from #412 on November 5th to #9 on November 14th. The surge in participation drove further price appreciation and set a new record for BTC ETF inflows.
BTC Network Activity, Adoption, and Fees
Daily Transactions: The 7-day moving average of daily transaction volume is around 543,000, down 15% quarter-over-quarter. Despite the decline, activity remains robust, at the 96th percentile of BTC's historical levels. While transaction count has decreased, the increase in transaction value has offset this impact, as evidenced by the rise in transfer volume.
Ordinals Inscriptions: Daily Ordinals (NFTs and meme coins on the BTC blockchain) transaction volume increased 404% quarter-over-quarter, reflecting the resurgence of speculative fervor driven by price appreciation and favorable regulatory developments.
Total Transfer Volume: BTC transfer volume increased 118% quarter-over-quarter, with a 7-day moving average of around $85 billion.
Average transaction fee: Bitcoin transaction fees decreased by 5% month-over-month, with an average fee of $3.58, and an average transaction value of approximately $157,000, corresponding to a transaction fee rate of around 0.0023%.
Bitcoin market health and profitability
Profitable address ratio: With BTC price reaching new all-time highs, currently around 99% of BTC addresses are in a state of profit.
Unrealized Net Profit/Loss: This ratio has increased by 21% over the past month, reaching 0.61, indicating a significant improvement in the relative balance between unrealized profits and unrealized losses. As a market sentiment indicator, this ratio is currently in the "Belief-Denial" zone, corresponding to the rapid expansion and contraction phase between the peak and trough of the market cycle.
Bitcoin on-chain monthly dashboard
Source: glassnode, VanEck Research, as of October 15, 2024
Bitcoin miners and the crypto market capitalization
Mining difficulty (T):
The BTC network difficulty has increased from 92 T to 102 T, reflecting miners expanding and upgrading their equipment fleet. The BTC network automatically adjusts the difficulty every 2,016 blocks (approximately two weeks) to ensure that each block is mined in around 10 minutes. The increase in difficulty indicates intensified competition among miners, and also represents a strong and secure network.
Miners' daily total revenue:
Miners' daily revenue increased by 30% month-over-month, benefiting from the rise in BTC price, but the BTC-denominated transaction fees decreased by 30%, impacting the total revenue to some extent.
Miners' transfers to exchanges:
On November 18th, miners transferred approximately $181 million worth of BTC to exchanges, which is about 50 times the previous 30-day average, driving a 803% month-over-month increase in the 7-day moving average. This extreme movement is the highest level since March, similar to the period before the last BTC halving. While the sustained high miner-to-exchange transfer volume may indicate an overheated market, this peak occurred after the summer miner sell-off at lower levels, suggesting it is for operational and growth purposes, rather than a signal of a market top.
Crypto stock total market capitalization:
The 30-day moving average of the MarketVector Digital Assets Stock Index (MVDAPP) increased by 47% month-over-month, outperforming BTC. Major index constituents like MicroStrategy and Bitcoin mining companies, through their BTC holdings or mining operations, directly benefit from the rise in BTC price. Meanwhile, companies like Coinbase also capitalize on the broader crypto market gains, as the price appreciation drives expectations for increased trading fees and other revenue sources.
Source: farside.co.uk, as of November 18, 2024
