Author: Michael Nadeau, The DeFi Report; Translator: Jinse Finance xiaozou
With BTC rising 45% last month, I'm seeing a lot of people discussing whether this is a "local top" or if it will "full-throttle" to the end of the year. These are mostly the knee-jerk reactions of "key opinion leaders" and other market prophets and analysts on social media. Of course, no one has a crystal ball to predict the future. But to build a firm conviction, we like to combine our intuition, experience, and analysis with solid data. This helps us allocate probabilities as accurately as possible for potential outcomes.
This is the hallmark of The DeFi Report, where our research typically includes:
Macroeconomic analysis
On-chain data analysis
Market sentiment analysis
Fundamental analysis of blockchains and protocols
Native/characteristic analysis of cryptocurrencies (such as politics, geopolitics, regulation, communities, and other unique aspects of cryptocurrencies as a global asset)
In this report, we will focus on BTC on-chain data, with additional content on SPX6900 at the end.
Our goal is to determine where we are in this cycle. To do this, we analyzed BTC's current key metrics and compared them to past cycles.
1. Long-term Holders and Short-term Holders
(1) Long-term Holders
Let's first look at BTC's "Smart Money".
What is Smart Money doing now? Selling.
Long-term holders took profits in Q1 this year, re-accumulated wealth in the summer, and started taking profits again after the US election. This is not surprising. After all, BTC rose 45% last month. It's up 600% from the cycle low.
Currently, 69% of the circulating BTC supply is in the hands of long-term holders. As the bull market continues, we expect to see long-term holders transfer their tokens to short-term holders. So this 69% figure should continue to decline.
Data Summary:
In the 2021 cycle, BTC price peaked when 58% of the circulating supply was held by long-term holders.
In the 2017 cycle, BTC price peaked when 51% of the circulating supply was held by long-term holders.
Conclusion: Smart money is starting to take profits. We believe this will continue as new money enters the market. For prices to rise, demand (new money) must exceed supply. We believe this will be the case.
(2) Short-term Holders
Turning to BTC's "New Money".
Short-term holders are new entrants to the market. In a bull market, we typically see this group trending upwards, while the number of long-term holders declines. This is exactly what we're seeing today.
Short-term investors re-entered the market in Q1. Many short-term players exited during the big shakeout in the summer. Now we're seeing a new surge of momentum.
Data Summary:
Currently, 16.6% of the BTC supply is held by short-term holders.
In the 2021 cycle, BTC reached its peak with short-term holders holding 25% of the circulating supply.
In 2017, BTC reached its price peak when short-term holders controlled 70% of the supply.
Conclusion: New money is flowing into BTC. Based on past cycles, we may see even more new money flow in going forward.
2. Exchanges
(1) Exchange Balances
Currently, exchange balances are declining. This is somewhat anomalous, as with rising prices, we should see tokens flowing into exchanges. Instead, we're seeing BTC leaving exchanges, likely in the form of self-custody.
Notably, this is not the first time we've seen this. At the start of the 2021 price rise, the yellow and black lines diverged in a similar pattern. In the later stages of the cycle, the funds eventually returned to the exchanges.
In addition to BTC exchange balances being at their lowest levels since 2019, I've also heard that over-the-counter desks are severely lacking in BTC. Here's a comment from Marcus Theilen, founder of 10x Research, on a recent post I made on LinkedIn:
Conclusion: Bullish
(2) Funding Rates
Futures market funding rates can help us understand trader sentiment and momentum. Green means longs are paying shorts to maintain their positions. Red means shorts are paying longs.
Data Summary:
Currently, BTC's funding rate is 0.012%, having reached as high as 0.025% when BTC price was approaching $100,000.
In March this year, the funding rate reached as high as 0.07%.
In the 2021 cycle, the funding rate peaked at 0.17%.
Conclusion: Historically, the current funding rate level is quite low - considering BTC's trading price is close to $100,000. High funding rates indicate excessive leverage, a "house of cards" market structure. This is not what we're seeing today. So, bullish.
3. Market Value to Realized Value Ratio (MVRV)
The MVRV Z-Score helps us understand the relationship between BTC's current market value and its "realized value", which is the network's cost basis. Essentially, it tells us the average unrealized gains of BTC holders. It has historically done an excellent job of identifying cycle peaks.
Data Summary:
The current MVRV is 3.17. This means the average holder has 217% unrealized gains.
The 2021 cycle peak MVRV was 7.5 (650% gains).
The BTC peak in 2017 had an MVRV of 11 (1000% gains).
Let's dig deeper and focus on the long-term holder group:
The current long-term holder MVRV is 3.89.
In March, the MVRV was 3.76.
The long-term holder MVRV reached as high as 12 when BTC price reached its peak last cycle.
It peaked at 35 in the 2017 cycle.
The short-term holder MVRV is currently 1.26, indicating an average gain of 26% for short-term holders.
Data Summary:
The MVRV was 1.45 in March.
It reached a peak of 1.8 in the 2021 cycle.
It was 2.4 in the 2017 cycle.
Conclusion: Both long-term and short-term holder MVRV have room to run higher before this cycle ends.
4. Pi Cycle Top Indicator
Similar to the MVRV score, the Pi Cycle Top Indicator has historically been a good tool for identifying cycle peaks. It measures momentum by comparing a shorter 111-day moving average (green) to twice the value of a longer 350-day moving average.
When the market is overheated, the shorter moving average will cross above the longer one in a parabolic fashion.
Conclusion: The shorter moving average has not yet exhibited a parabolic trend, suggesting a sharp rise and fall could be imminent.
5. Market Sentiment
Since November 1st, we've been in the "Extreme Greed" zone, and have remained there ever since. Of course, when others are greedy, you should be fearful.
However, there are some subtle differences that need to be explored. For example, in early November 2020, we entered the "extreme greed" phase for the first time. We have remained there until that cycle peaked in April (a 5-month cycle with a few brief corrections that left us in "greed").
Other off-chain indicators also suggest that the "extreme greed" phase of this cycle has begun. For example, the viewership of popular crypto YouTube channels is still around half of the previous cycle's peak. The Coinbase App is ranked 15th (it was ranked 1st in the previous cycle).
Finally, I see more people calling this a "local top" rather than a true "super cycle". This is not what we typically see at the top. At a true top, it is more likely that very few will be calling for it, as the extreme euphoria will have set in - many market participants will believe the "new normal" will continue.
Conclusion: While there are some signs of a boom (such as pump.fun, Microstrategy, meme coins, AI proxies, the return of NFTs, etc.), more extreme greed is likely to come. Expecting volatility is human nature.
6. SPX6900 Data Attached
Let's look at SPX6900 - a meme coin we mentioned in a previous report article (and held a small amount of). I strongly feel that the trajectory of meme coins we've seen in this cycle is a prelude to what may happen in the future.
Why?
It's obvious that retail investors prefer meme coins. People like to gamble. Trading meme coins seems to have a certain "gambling" aspect to it. In short, this is my view on meme coins. A gambling game. This is the utility of meme coins. It brings a sense of community and endless dopamine release.
Undoubtedly, meme coins are attracting new users. I think they are a win-win for the crypto world, while acknowledging that they are not suitable for everyone. Many meme coins are scams. Many people will suffer heavy losses from playing this game.
Now, to be frank, as someone who has spent thousands of hours researching the crypto market, my intuition for this industry is basically just "intuition". But I want to share a sample of my SPX tracking so you can get a sense of some analytical research.
When it comes to meme coins, I mainly look at the following:
Abundant promoters and social media chatter (mindshare/attention)
Continuously growing token holder base
Projects that have already made big moves, such as sales or mergers.
Market cap over $100 million
Sufficient trading liquidity
Exchange listings (or likely future listings)
Large whale players (exhibiting high confidence)
Clear slogans
A community that makes extremely high price predictions
Traded on Solana (easily accessible via Coinbase, Phantom)
Global market/addressable interest
SPX6900 seems to fit the above criteria. Here are some key points:
Note: Its social media accounts have grown from 9,000 followers a few months ago to over 50,000. Its largest promotional account (Murad) has grown from 110,000 followers to 550,000 during this process, spawning a few smaller promotional accounts.
Token holder growth: Its token holders have grown from around 3,000 a few months ago to 79,000 now, the fastest growth on Solana (also available on Base and Ethereum).
Resilience: Prior to the parabolic move a few months ago, it had multiple corrections of over 70%. The peak price of around $0.94 per token has dropped by about 50%. It has traded in the range of $0.49 to $0.72 over the past seven weeks.
Whales: SPX has over 44,000 holders with over $10,000 on Solana alone. This is nearly half of WIF and over half of Bonk (both of which have 5x the market cap). It has close to a third of the 100,000 and 1 million token holders of Pepe, whose market cap is 13.4x that of SPX.
Global market: A simple idea that anyone can understand. Currently traded on KuCoin (Asia) and Bybit (UAE), as well as on Solana, Ethereum, and Base DEX.
Slogans: "Flip the stock market" and "Stop trading, start believing in something".
Absurd price predictions: Murad's target is $100 billion. Note that Doge reached $90 billion in the previous cycle, emboldening dreams.
These are my thoughts. Please note that I have no affiliation with SPX6900 or anyone associated with the project. Investing in cryptocurrencies is highly risky. Meme coins are on the far end of the risk curve. Our data querying and analysis methods may be flawed, and our analysis may be incorrect. And SPX6900 could crash to zero very soon.
Please note that my data sources are a private Dune dashboard and Holderscan. I'm researching more data and hope to share it with you soon.
7. Conclusion
Local top or full throttle to the end of the year?
This is the question we raised at the beginning. Everyone wants to know where we'll be by the end of the year. I'm not a trader, nor am I someone who is too focused on short-term price movements, but I believe it's possible for Bit to rise from here - potentially reaching the $120,000 range before Christmas.
I'm not 100% certain about this. I will always look towards volatility. But I do believe that Bit prices will go higher by 2025.
Of course, we're also monitoring the broader economic situation. Global liquidity is currently showing some bearish signals. The US dollar index has retreated from its local high of 108, but remains elevated. CPI data will be released on December 12th, and the Fed's policy meeting will be held on December 18th.
As always, do your own research. Expect a lot of volatility. Don't invest anything you can't afford to lose.
