Bitcoin hits $50,000. Does the data tell you whether the bull market has peaked?

Original title: "Bitcoin hits $50,000, does the data tell you that the bull market has peaked?"

Original source: PANews, Carol

In this round of bull market, according to CoinMarketCap statistics, BTC has hit a new all-time high of $41,946.74 on January 8, but then immediately adjusted its status, which made the market begin to wonder whether this round of bull market has come to an end. Until February 6, after Tesla CEO Elon Musk repeatedly "called orders", BTC once again stood above the $40,000 mark during the trading session, breaking through $48,000. On New Year's Eve, Bitcoin once again stood at a new high of $49,000, and $50,000 was within reach, which made investors expect that this round of bull market may not have peaked yet.

It is generally believed that in the history of BTC development, 2017/2018 was a bull market, especially from December 2017 to January 2018, when BTC completed the bull-bear transition from "peaking to declining". If we compare the current BTC data with this, what are the similarities and differences between the two bull markets? Has this bull market peaked?

Volatility decreases, and the maximum MVRV becomes smaller

A major notable feature of this bull market compared to the 2017/18 bull market is that the coin price has risen more, but with less volatility.

According to CoinMarketCap statistics, from December 2017 to January 2018, the peak price of the coin was about $19,497, with a maximum increase of about 77.63%. In January, it actually entered a downward channel. At the end of January, the coin price was about $10,221, and the overall increase in two months was -6.88%. From December 20 to January 21, the peak price of the coin reached $40,798, with a maximum increase of about 116.98%, and the overall increase in two months reached 76.11%.

As the market value of BTC grows, its daily volatility is also gradually decreasing. From December 2017 to January 2018, the highest daily volatility of BTC was about 35.78%, especially in the middle and early December when the price of the currency was rising, the volatility exceeded 25% for many days. From an overall level, the average daily volatility of BTC was about 12.18% in the two months of 2017/2018.

From December 20 to January 21, BTC's daily volatility was much smaller. Even in December when the price of the currency was rising, the daily volatility basically did not exceed 10%. In two months, BTC's highest daily volatility was about 25.52%, and the average daily volatility was about 7.91%.

With high price increases and low volatility, the current bull market's holding income is slightly higher than the previous bull market. According to statistics, from December 2017 to January 2018, the highest return rate for holding coins for 30 days was about 199.1%. When BTC fell to the price level in early December 2017 in January 2018, the 30-day holding income rate was negative, about -25.4%, which shows that in the last bull market, investors affected by FOMO suffered greater losses due to chasing high prices. But from an overall level, during the two months of the last bull market, the average return for holding coins for 30 days was about 42.1%.

In contrast, from December 20 to January 21, the highest return rate for holding coins for 30 days was slightly lower, about 120.7%, but the overall average return for holding coins for 30 days was higher, about 45.7%. Although the rapid decline in the return rate of holding coins for 30 days can still be seen in this round of bull market, the difference is that investors only reduce their returns due to higher position building costs, and do not suffer losses.

The unilateral upward trend in this round of bull market is more obvious. The price of the currency has broken through the $40,000 mark many times, but the MVRV indicator shows that the market's price consensus is still very strong, and the bubble level is lower than the peak of the previous bull market.

The MVRV index is an index developed by Coin Metrics that reflects the preferences of long-term investors. It represents the ratio of the circulating market value to the realized market value. If it is less than 1, it means that the current price is lower than the overall value consensus of market participants and the pricing is underestimated. Conversely, if it is greater than 1, it means that the current price is higher than the overall value consensus of market participants and the pricing is overestimated.

According to statistics, the average MVRV index of BTC from December 2017 to January 2018 was about 4.7, and the average MVRV index of BTC from December 2020 to January 2021 was about 3.8. Although the overall value consensus of market participants was higher than the current price during the two bull markets, this bull market has a higher coin price increase, and not only the MVRV average is lower, but also the peak is lower. The peak during this bull market is about 3.79, which is lower than 4.72 during the previous bull market.

This means that the current level of overvaluation pricing by market participants is lower than that during the previous bull market. If the highest pricing level during the previous bull market is used as a reference, then this means that market participants in this bull market can still tolerate a higher price consensus, and BTC still has room to rise.

Nominal trading volume increased significantly, while the proportion of trading circulation decreased

During this round of bull market, the market trading activity is higher. According to statistics, from December 2017 to January 2018, the nominal average daily trading volume of various exchanges was about US$13.332 billion, and the highest single-day trading volume was about US$23.841 billion.

From December 20 to January 21, the nominal average daily trading volume of various exchanges reached US$54.325 billion, with the highest daily trading volume of about US$123.321 billion, and there were 5 days with daily trading volumes exceeding US$80 billion. On average, the average daily trading volume during this round of bull market is about 4 times that of the previous round.

In terms of circulation, the number of BTC freely circulating in the market during this bull market is greater, but the proportion of total supply is smaller. According to statistics, from December 2017 to January 2018, the average daily number of BTC freely circulating in the market was about 13.9821 million, and from December 2020 to January 212, this number was about 14.5098 million, an increase of about 3.77%.

The absolute growth of free float is related to the absolute growth of the total supply of BTC, but if the proportion of free float to total supply is calculated, it can be found that during this bull market, the proportion of free-floating BTC to total supply has decreased by about 5 percentage points. According to statistics, from December 2017 to January 2018, the average free-floating BTC accounted for about 83.33% of the total supply, while from December 2020 to January 212, this value dropped to 78.10%.

According to CoinMetrics’ definition of free float, “free float tokens do not include tokens owned by companies, foundations, and founding teams; tokens whose investors have been formally restricted (by law or smart contracts); tokens that are still visible on the chain but have been destroyed; or tokens that are provably lost (if >0.25% of the supply).” It can be speculated that the decrease in free-floating BTC may be related to the increase in the long-term holdings of companies (institutions), and the increase in the number of tokens that are restricted by individual investors due to mortgages, etc. But overall, this means that BTC liquidity has decreased during this bull market.

Not only has the liquidity of BTC decreased, but the distribution of BTC chips has also become more dispersed during this bull market.

According to statistics, from December 2017 to January 2018, the total amount of coins held by the top 100 addresses accounted for an average of about 17.82% of the total supply, with the highest proportion being about 18.68%. However, from December 2020 to January 212, the total amount of coins held by the top 100 addresses accounted for an average of 13.41% of the total supply, a decrease of about 4.4 percentage points from the previous bull market, and the dispersion of chips has been further strengthened.

The number of active addresses and transactions on the chain is basically the same

Unlike market data which changes significantly over different time periods, Bitcoin's on-chain data was relatively stable during these two bull markets.

From the perspective of the scale of on-chain users, according to statistics, from December 2017 to January 2018, the average daily active addresses of Bitcoin on the chain were about 1.0432 million, and the highest number of active addresses in a single day was about 1.2904 million. In addition, there were 38 days with more than 1 million active addresses per day, accounting for 62.30% of the total days (62 days).

From December 20 to January 21, the average daily active addresses of Bitcoin on the chain were about 1.1083 million, an increase of about 6.24% from the daily average level of the previous bull market. There were 55 days with more than 1 million active addresses per day, accounting for 88.71% of the total number of days, of which the highest number of active addresses per day was about 1.3449 million.

Judging from the number of on-chain transactions, the data during the two bull markets were basically the same. From December 2017 to January 2018, the average daily number of Bitcoin on-chain transactions was about 323,400 times, with the highest single-day transaction number reaching 498,100 times. In addition, there were 7 days with more than 400,000 single-day transactions.

From December 20 to January 21, the average daily number of Bitcoin on-chain transactions slightly decreased to 319,300 times, and the highest daily transaction number was only 402,100 times, which was lower than the data during the previous bull market, but it was still basically the same as the active addresses on the chain.

It can be seen that the driving force behind BTC's continued rise is not mainly generated by the improvement of on-chain data, but is more dependent on other factors in the market environment.

The popularity of social media has slightly decreased, and the new bull market has not further "broken the circle"

During the two bull markets, the popularity of BTC on social media was different, which shows the difference in the composition of market participants. According to statistics, from December 2017 to January 2018, there were 5.3993 million tweets with the topic "#Bitcoin" on Twitter, with an average of about 87,100 tweets per day and a maximum of about 155,600 tweets per day. The change in the number of tweets is basically consistent with the price trend of the currency.

From December 20 to January 21, there were 4.4026 million tweets with the topic "#Bitcoin" on Twitter, an average of about 71,000 tweets per day, and the total number of tweets decreased by 18.46% compared with the previous bull market. Moreover, the number of tweets reached a small peak at the end of January, with a maximum of about 200,800 tweets per day, but it was not the peak of the currency price at that time.

On the other hand, judging from the search index of the keyword "Bitcoin" in Google, the average daily search index from December 2017 to January 2018 was about 233.8, with a peak of about 616.9. The average daily search index from December 2020 to January 21 was about 150.8, with a peak of about 363.6. The average daily search index dropped by about 35.50%.

By comparing the two, we can find that the social media popularity of this bull market is lower, which may mean that the participants and main drivers of this bull market are not from the general public.

The market is formed in continuous transactions. Comparing the current data with the previous bull market cannot accurately deduce the progress of the future bull market. In February, BTC is still in the upward channel. As of February 8, CoinMarketCap shows that BTC has hit a new high of 47131.35. The bull market is still ongoing. The only thing that can be confirmed is that the duration of this round of bull market will be much longer than the previous round.