In the most recent edition of Capriole Investments’ “Bitcoin Update,” Charles Edwards, founder and CEO, takes a deep dive into the current state of Bitcoin by analyzing thirteen on-chain indicators to tackle the critical question: Is the Bitcoin cycle top in sight?
About a month after a promising technical breakout above $65.5K, with a brief touch of $70K, Bitcoin faced a sharp reversal, hinting at a possible cycle top. Edwards points out a unique pattern in Bitcoin’s history, where it has not only broken a new all-time high but also had two retests instead of printing new highs. This pattern, according to him, signals a potential size-related consolidation but also reflects market weakness.
Let’s dive into the detailed analysis of the thirteen on-chain indicators:
1. Supply Delta + 90 Day CDD: These metrics offer insights into supply movements and coin destruction days, with a recent rounded top formation after a vertical increase in both metrics. Historically, this corresponds with market peaks, indicating a bearish trend.
2. Long-term Holder Inflation Rate: This metric has climbed from 0.5 in April to 1.9, approaching the threshold of 2.0 that has historically predicted cycle tops. This suggests that long-term holders are increasingly likely to sell, marking another bearish signal.
3. Hodler Growth Rate (HGR): The HGR, measuring the net growth of long-term holders, has not reached new highs in over six months, aligning with historical precedents of cycle tops and scoring bearish.
4. Bitcoin Heater: This metric, analyzing extreme readings in funding, basis, and options, stands neutral in the current cycle, indicating no significant market exuberance that typically precedes market tops.
5. Dynamic Range NVT: Despite moving out of the value zone due to increased on-chain activity, this metric remains neutral, suggesting a balanced market valuation.
6. On-chain Transaction Fees: Elevated transaction fees, indicating high network demand, can signal cycle peaks if followed by a sharp decline. While current fees have shown some spikes, they largely mirror the decline noted in April, maintaining a neutral stance.
7. Net Unrealized Profit/Loss (NUPL): Positioned below the euphoria zone at 74%, the NUPL reflects potential caution but not outright exuberance, maintaining a neutral state.
8. Spent Volume 7-10 years: A significant increase in spent volume from older coins, such as the massive transaction on May 28 involving 138,000 Bitcoin, marks a bearish signal, indicating potential market pressure from large-scale sell-offs.
9. SLRV Ribbons: Showing a bearish crossover for the first time this year, this metric contributes to the bearish outlook, despite not reaching an elevated point suggesting a cycle top.
10. Dormancy Flow: With dormancy flow peaking significantly this year, similar to peaks seen in previous cycles, this bearish signal suggests a potential cycle top is near.
11. Percent Addresses in Profit: Over 95% of addresses being in profit usually precedes a cycle top, turning bearish with recent high and subsequent decline, signaling potential profit-taking by investors.
12. Mayer Multiple: Remaining below the 2.5 threshold historically indicating major cycle tops, the Mayer Multiple at 1.0 is neutral, suggesting a heated market but not at the extremes of previous cycle peaks.
13. US Liquidity: A persistent downtrend in liquidity aligns with a bearish outlook for Bitcoin, indicating a negative liquidity growth trend.
Out of the thirteen metrics analyzed, eight are bearish, five are neutral, and none are bullish, suggesting a potential cycle top for Bitcoin. Despite the bearish signals, Edwards emphasizes the importance of considering technical patterns and broader market behavior. While Bitcoin’s price is currently above the $58K support level, the potential formation of a Wyckoff Accumulation pattern on the daily chart indicates possible bullish potential.
The mixed signals call for cautious optimism and vigilant risk management. Edwards speculates on the possibility of a challenging summer period for Bitcoin on-chain activity, with potential for improved risk-adjusted returns post-Halving in Q4 and beyond.
As of the latest update, BTC is trading at $62,747. The market remains dynamic, with technical and on-chain indicators pointing to a pivotal moment for Bitcoin’s cycle.
