Original author: Nathan Frankovitz, Matthew Sigel
Compiled by: Wu Blockchain
Driven by the regulatory tailwind 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 continue.
As we predicted in September, BTC price experienced high volatility and a surge 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, when BTC price doubled by the end of the year and further increased by about 137% in 2021. As the government's attitude towards BTC has undergone a significant shift, investor interest is rapidly increasing. Recently, the number of investment inquiries we have received has surged, and many investors have realized that their allocation to this asset class is clearly insufficient. Although 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 5, BTC soared about 9% to a new all-time high of $75,000. This is consistent with our previous observation: when the likelihood of a Trump victory increases, BTC price will rise accordingly. Trump has explicitly promised in his campaign to end the "enforcement-based" strategy of the U.S. Securities and Exchange Commission (SEC) and make the U.S. the "capital of crypto and BTC".
After Trump's election as president, regulatory resistance has turned into a driving force for the first time. Trump has already begun 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 a plan to establish a national BTC reserve and rewrite legislation related to crypto market structure and stablecoins, with FIT21 expected to be rewritten in market and privacy-friendly terms, and a new stablecoin draft allowing state-chartered banks to issue stablecoins without Federal Reserve approval.
As countries like the BRICS are exploring BTC and other alternatives to circumvent U.S. dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for the U.S. to project the global influence of the dollar. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the U.S. can maintain the global influence of the dollar and leverage the faster adoption of cryptocurrencies in emerging markets, which have a strong demand for financial services, hedging against local currency inflation, and DeFi.
We expect the SAB to be repealed in the first quarter of Trump's term, if not by the SEC, then 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 chairman with a more crypto-friendly candidate and end the agency's notorious "regulation by enforcement" era. Furthermore, by 2025, the U.S. will revise its Ethereum (ETH) ETF to support Staking, the SEC will approve Solana's (SOL) ETF 19b-4 proposal, and physically created and redeemed ETFs will make these products more tax-efficient and liquid. Given Trump's previous acknowledgment of the commonalities between BTC mining and energy-intensive AI, energy regulations are expected to be relaxed, making baseload energy (such as nuclear) cheaper and more abundant, thereby driving the U.S. to a global leadership position 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 igniting entrepreneurial dynamism, the U.S. is poised to become the global leader in crypto innovation and employment, transforming cryptocurrencies into a key domestic growth industry and an important export product for emerging markets.
BTC Dominance
The 7-day moving average of BTC dominance (a metric measuring BTC market capitalization relative to the total crypto market capitalization) has risen 2 percentage points this month to 59%, reaching its highest level since March 2021. While this upward trend, starting from 40% in November 2022, may continue in the short term, it is likely to peak soon. In September, we pointed out that a Harris victory could increase 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 more widespread 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, traders in the Asian market trading session appear to have significantly increased their BTC holdings this month, contrary to the trend in recent years where Asian traders are typically net sellers while European and U.S. traders are net buyers. However, the surge in BTC price on election night occurred during the Asian trading session, likely due to a large number of U.S. investors trading around the election. This specific event makes it difficult to attribute such price fluctuations entirely to regional dynamics. Consistent with historical behavior, traders in the U.S. and European trading sessions continue 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 evaluate the market's risk level and potential price tops. This month, our analysis starts with perpetual contracts (perps), where the performance of funding rates provides insights into market sentiment and helps measure the likelihood of market overheating.
BTC price typically shows 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
Since April 2020, we have analyzed periods where the 30-day moving average perpetual contract funding rate exceeded 10%. The average duration of these periods is about 66 days, with an average return from open to close of 17%, although the duration of individual periods varies significantly. The only exception was a single-day spike on June 18, 2024, reflecting short-term market sentiment. Other instances have 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 on days with lower funding rates.
However, the data shows a pattern of underperformance over longer time frames. 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.
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 has also been 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 one following the 2020 US elections, when the sustained funding rates above 10% drove a 260% increase over 186 days. With BTC currently trading around $90,000, our $180,000 target price remains viable, reflecting the potential for a ~1,000% cycle return from trough to peak.
Higher 30-day moving average (DMA) relative unrealized profit (RUP) levels (>0.60 and 0.70) have historically often signaled BTC price tops.
BTC Average Realized Profit vs. 30-day Moving Average Relative Unrealized Profit (RUP) (November 13, 2016 - November 13, 2024)
Source: glassnode, as of November 13, 2024
BTC Average Realized Profit 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), 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, elevated 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 has often coincided with market tops, as the high proportion of unrealized profits triggers more profit-taking. Conversely, when RUP levels fall below 0.60, it indicates more favorable market conditions for long-term buying, with historical data showing higher 1-year and 2-year returns when buying below this threshold.
Analysis of the past two market cycles suggests that 30-day DMA RUP levels between 0.60 and 0.70 have typically offered the highest short-term to medium-term returns (7 days to 180 days). This range often reflects the mid-stage of a bull market, where bullish sentiment is rising but has not yet reached excessive levels. In contrast, when 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, risks gradually increase as RUP approaches 0.70, underscoring 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.
Crypto Search Trends in the US
Source: Google Trends, as of November 18, 2024
The search interest for 'Crypto' on Google is an important indicator of retail investor interest and market momentum. Historical data shows that peaks in search interest have typically coincided with peaks in the overall crypto market capitalization. For example, the search interest peaks in May and November 2021 were followed by significant market declines: a ~55% correction in the two months after the May peak, and a ~75% bear market 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 high 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 in 'Crypto', the Coinbase app store ranking is another important indicator of retail investment interest. On March 5, after BTC price surged ~34% in 9 days and retested the ~$69,000 all-time high from 2021, Coinbase re-entered the top 50 app store rankings. Although BTC reached a new high of around $74,000 later that month, as price volatility subsided into the summer doldrums and public attention shifted to the presidential election, retail interest waned. However, BTC's breakout on election night reignited retail interest, with Coinbase's app store ranking soaring from #412 on November 5 to #9 on November 14. The surge in engagement 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 range. While transaction counts have decreased, larger transaction loads have offset this impact, as evidenced by the rise in transfer volumes.
Ordinals Inscriptions: Daily Ordinals (NFTs and meme coins on the BTC blockchain) transaction volume grew 404% quarter-over-quarter, reflecting the resurgence of speculative fervor driven by price appreciation and favorable regulatory developments.
Total Transfer Volume: BTC transfer volumes grew 118% quarter-over-quarter, with the 7-day moving average now around $85 billion.
Average transaction fee: The BTC transaction fee decreased by 5% month-over-month, with an average fee of $3.58. The average transaction value was 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 profitability.
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
BTC Miners and Crypto Market Capitalization
Mining Difficulty (T):
The BTC block 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, which 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 decrease in BTC-denominated transaction fees had a certain impact on the total revenue.
Miners' Transfers to Exchanges:
On November 18th, miners transferred approximately $181 million worth of BTC to exchanges, which is 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 transfer volume from miners to exchanges may indicate an overheated market, this peak occurred after the relatively low miner selloffs in the summer, suggesting that this is for operational and growth purposes, rather than a signal of a market top.
Crypto Stocks Total Market Cap:
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 are also able to 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
