Speculation, data analysis, known patterns, fundamentals, daily news and more are various tools we use to predict what could be the next move of our favorite instrument: Bitcoin.
Genesis Bitcoin (BTC) was invented by a pseudonymous individual or group named Satoshi Nakamoto in 2008 and is the world’s first enduring cryptocurrency that succeeded where decades of digital cash experiments had failed.
Bitcoin’s monetary policy is enforced by a unique mix of software, cryptography and financial incentives rather than the whim of trusted third parties. The Bitcoin network is powered by a cryptographically secure, verifiable database called the blockchain—itself a technological phenomenon.
The Bitcoin ecosystem consists of a global network of stakeholders, including the miners who secure the network and drive the issuance of the Bitcoin currency, the traders who speculate on this radically market-driven asset, and the builders who work to bringing on board the cryptocurrency paradigm. .
How Bitcoin is Built Affects Its Patterns Bitcoin’s 19th millionth coin was recently mined, increasing the circulating coins in proportion to 90% of the total supply. Additionally, there is a common pattern known as the rainbow chart that displays the logarithmic regression path that bitcoin follows. The cyclical behavior of the security can be explained by the following facts:
Bitcoin tends to be generally bullish because the supply is limited and the amount of coins released into circulation is halved every four years. Each block mined now offers a reward of 6.25 BTC.
A total of 210,000 blocks are mined between each halving date, with a more visible aspect of the cycles: From the 1st block to the 70,000th block, Bitcoin appears to be in a bullish phase, from the 70,001st block to the 140,000th block a bearish phase and from the 140,001st block to the 210,000th block a sideways phase.
Bitcoin is the most dominant cryptocurrency. Indeed, it affects the entire cryptocurrency market because of its market capitalization. Its dominance is also cyclical and since 2016 it falls below 40% exactly when we enter the bearish phase (>140,000 blocks are mined) while the bullish phase is catorized by a dominance of around 70% of the total market.
The average withdrawal during an era (between two halving dates) is 80%.
The only indicator to consider: The MVRV ratio and Z score. The MVRV ratio was created by Murad Mahmudov and David Puell on the heals of the invention of the Realized Cap concept by the Coinmetrics team of Nic Carter and Antoine Le Calvez. Realized Cap is an alternative approach to Market Cap as a measure of network valuation. Rather than using the last traded price and multiplying by the coins in circulation as seen in Market Cap, Realized Cap approximates the value paid for all coins in existence by summing the market value of coins at the time they last moved on the blockchain. MVRV is simply the ratio comparing the two ie MVRV = Market Cap / Realized Cap. This is useful for getting an idea of when the exchange traded price is below “fair value” and is also very useful for spotting market tops and bottoms (Source: Coinmetrics.com).
The MVRV ratio is calculated by dividing the total bitcoin market value (MV) by its realized value (RV). Therefore, the metric represents the degree to which the current bitcoin market valuation is overstretched (values >1) or actually at a discount (values <1) compared to the holders' compounded cost base.
From the MVRV ratio we get the MVRV z-score, which first calculates the difference between the total bitcoin market value and its realized value, and then divides it by the standard deviation of the market valuation – a common statistical procedure called “standardization. ” The MVRV z-scores therefore represent the number of standard deviations each bitcoin market valuation increases or decreases relative to its realized value (Remember z-score >1 means overextended and z-score <1 discount)
What do indicators say?
We are currently at the 3rd halving era which took place on May 11, 2020, more precisely the END of the bearish phase. The intersection between the 140,000th block mining date and the logarithmic regression lows indicated 18,000 USD per bitcoin, quite close to the actual realized Low of 17592.78. The MVRV ratio is at 1 which gives attractions of a fair value (Source: CryptoQuant). The actual withdrawal from the bearish period was about 75% (80% average since inception).
(These explanations are for educational purposes only and are not financial advice)
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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