Based on historical patterns, the report compared the current cycle with the rebound after the 2020 US election. At that time, the price of Bitcoin more than doubled before the end of the year, and ultimately achieved a 137% increase in 2021. Citing key market indicators, analysts predict a similar trend in this cycle. For example, Bitcoin's market share reached 59% in November, the highest level since March 2021, reflecting renewed investor confidence in the asset.
The report also emphasizes strong on-chain indicators. Bitcoin's network activity shows resilience, with daily transaction volume approaching historical highs, and transaction volume increasing by 118% quarter-over-quarter. Although the number of transactions has decreased by 15%, the larger effective payload has driven its average transaction size to a new high. The report adds: "As Bitcoin price hits new highs, currently around 99% of holding addresses are in profit."
While maintaining an optimistic outlook on Bitcoin's short-term performance, the report also warns that Bitcoin may overheat. Analysis of perpetual futures funding rates indicates that persistently high rates are usually associated with cycle tops. As of mid-November, the funding rate has exceeded the threshold historically associated with short-term strong gains, but the gains will gradually diminish over a longer time frame.
Bitcoin's unrealized profit metric further supports the bullish outlook. The report points out that the relative unrealized profit (a metric that measures accounting gains) is typically within the mid-bull market range. However, if these levels approach historical peaks, it may indicate an increased risk of market correction as profit-taking accelerates. "Historically, an elevated 30-day moving average (DMA) RUP level (especially above 0.60 and 0.70) indicates strong market sentiment, but also the potential for overheating."
