Author: 636Marx

Bitcoin seems to have stabilized at $90,000, and it only needs a small increase to break through the long-awaited $100,000 mark. With Bitcoin hitting a new high of $94,000 yesterday, the author is starting to seriously consider this question: Has Bitcoin reached its peak, and if not, how much more room for growth is there?

FOMO sentiment weakens, market returns to rationality

The fear of missing out (FOMO) has always been the traditional driving force behind Bitcoin's rebounds. However, the current market sentiment seems less optimistic than the previous bull market cycles. The latest data from the Internet shows that compared to the excitement after the US presidential election on November 5, the US search volume for Bitcoin has dropped to 22nd place, which may include many mainland users using VPNs.

Key market sentiment indicators

The Crypto Fear & Greed Index, which ranges from 0 (extreme fear) to 100 (extreme greed), has been hovering above 80 for the past week, reaching as high as 90. Historically, such high readings usually occur just before local price tops. This index last reached these levels during the Bitcoin surge to $60,000 in early 2021.

Compared to past bull markets, the global Google search volume for Bitcoin has been declining continuously within 7 days. Some believe this is a sign of market maturity, while another possibility is a lack of new user participation in the discussion about Bitcoin.

The foundations of Bitcoin are shaking

Bitcoin mining is the largest and primary source of incremental capital inflows. The latest financial report from Argo Blockchain, one of the major Bitcoin mining companies, revealed facts contrary to Bitcoin's prosperity in the third quarter of 2024.

1. Declining profitability: Argo reported a mining profit margin of 8% in the third quarter, a significant drop from 58% in the same period last year. This decline is mainly due to the lack of power subsidies that previously supported the business.

2. Declining revenue: Argo's quarterly revenue decreased from $104 million in the third quarter of 2023 to $75 million. Although debt was reduced by $124 million, the company still had a net loss of $63 million this quarter.

3. Increasing costs: Rising energy prices and an increasingly crowded mining ecosystem have further squeezed profit margins, bringing hardship to the profitability of small and medium-sized miners.

Russia will implement strict Bitcoin mining restrictions, reportedly banning Bitcoin mining in certain regions from December 2024 to March 2031, as Bitcoin mining is said to disrupt local winter heating.

Assessing Bitcoin's future: Downfall or Upswing?

Several on-chain indicators provide valuable insights into Bitcoin's current status and potential trajectory:

MVRV Ratio

The Market Value to Realized Value (MVRV) ratio compares Bitcoin's market capitalization to its realized cap (the total purchase price of all tokens). A high MVRV, usually above 3.7, signals a market top. Currently, this ratio is 2.67, indicating that the price may have further upside before reaching an overbought level.

Realized Capital Inflow

This metric measures the capital flowing into the market, and strong growth indicates robust demand. Bitcoin ETFs continue to see healthy capital inflows, suggesting the potential for a sustained bullish trend.

Coin Days Destroyed (CDD)

This indicator tracks the dormant Bitcoin activity, and it is still below the critical threshold. A significant increase may signal that long-term holders are starting to take profits, which could lead to a price decline. The widely accepted figure for dormant Bitcoin is around 15 million, with the potential loss of private keys estimated to be around 10%-30% of 19 million.

Do Bitcoin spot ETFs limit the upside potential of Bitcoin?

The Bitcoin spot exchange-traded funds (ETFs) launched in the US, such as those by BlackRock, Ark, and Fidelity, have significantly catalyzed the recent rebound. These ETFs have seen substantial capital inflows, indicating strong institutional demand. However, the author believes that the ETF hype has already been digested by the market, and any additional gains are just the profits of these institutions.

Of course, with the Federal Reserve continuously raising interest rates, Bitcoin also faces competition from traditional assets like US Treasuries.

The author's view:

Undoubtedly, Bitcoin is still in a bull market. Of the 21 million Bitcoins, there are still 2 million left to be mined, and the continuous halving mechanism will drive up the price of Bitcoin.

However, it is worth noting that from the perspective of transaction addresses, Bitcoin lacks incremental users. Whether due to energy issues or political issues, the instability of Bitcoin mining is a shaking of Bitcoin's foundations. As an ordinary user, the author does not recommend chasing high Bitcoin prices, and even more so not to enter the market through contracts. Every retracement and rally is accompanied by regret and harm.