Bitcoin has been flat for 4 months, but why is this not the cycle top?

Original Title: “60,000 - 70,000”

Author: JAY

Compiled by: Shenchao TechFlow

Bitcoin has been hovering in the $60,000 - $70,000 range for nearly 4 months.

While this is frustrating, it is not uncommon. Typically, after a halving event, we see the market enter a period of stagnation. If we look back at the halving cycles of 2016 and 2020, we can find similar consolidation phases before entering the so-called "banana zone," which is the final parabolic rise phase.

However, we should not be content with "this is how it has been in the past," but rather try to analyze the current market conditions to learn from it and even profit.

"What about other cryptocurrencies? What about airdrops? What about ETH ETFs?"

These questions will be discussed in future articles, while this article mainly focuses on Bitcoin.

On the surface, if we try to answer why there is a large supply around $70,000, the simplest and most obvious answer might be:

• A significant amount of capital entered the market ahead of the halving event;
• Miner revenues are halved, forcing them to sell;
• (Possible) U.S. tax factors;

We can list countless reasons, but it is more meaningful to look at some objective indicators.

Market Value to Realized Value (MVRV).

This is the ratio between Bitcoin's weighted average purchase price (i.e., the price at the last movement) and the current market price. In short, it reflects Bitcoin's unrealized profits.

MVRV peaked in March at a ratio of 2.75, which means that when the Bitcoin price was $73,100, the average purchase price was $26,580. Although this indicator is not entirely accurate (for example, centralized exchanges may not move tokens but just update database entries), it typically rises in sync with market prices reaching their peak. At some point, people need to take profits, right?

Another interesting indicator is the change in long-term holder positions, defined as wallets holding Bitcoin for more than 155 days. Tops are usually formed when these holders finish selling, while bottoms are formed when they start buying. From the end of January to the end of March, there was a noticeable spike in selling volume. More importantly, they also began to repurchase.

Finally, considering that Bitcoin is priced in dollars, it is also crucial to observe the dollar supply. How much "capital" is flowing in the market? More importantly, is this amount increasing or decreasing? What is the speed? Is it accelerating or decelerating?

I think this chart says it all—global M2 (a key factor in global liquidity) growth has clearly slowed since the end of March / beginning of April. The market is forward-looking; if the outlook for M2 slows, the market will expect the dollar to strengthen against cryptocurrencies (all else being equal).

In addition, there are many other signals:

Coinbase jumped 106 spots in ranking in a single day (they received a large number of app downloads).

Bitcoin ETF inflows peaked at $1.045 billion and then sharply slowed.

A lot of very positive regulatory news, but the price follow-up has been increasingly weak.

Miners are actively selling during the post-halving downturn.

Selling at the top (including local tops) is always difficult because they often last longer (or shorter) than we expect, and emotions make it hard to remain objective. Additionally, the market can sway us; we may be cautious at the beginning of a breakout, then envy those who are making more than us (buying memes, increasing leverage), and finally try to replicate and "catch up" to the end.

The good news is that I don't think this is the cycle top (if the concept of a cycle top still exists under factors like ETFs). As I mentioned at the beginning, I think this is quite typical in the weeks and months following a halving. Each cycle is obviously different, but I believe the fundamental principles are roughly the same:

• There can only be so much unrealized profit in the system;
• Selling by long-term holders forms tops (buying forms bottoms);
• The speed of increase or decrease in dollar supply;

These factors will manifest in different ways depending on the positioning of participants.

I think it is unlikely that this is the cycle top. While it is difficult to pinpoint exactly when we will rise again, I believe we are closer to breaking out of this range than we initially thought (hopefully to the upside).