By Frances Yue

Photo: Terrence Horan, Dow Jones

Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

Bitcoin was pushing higher toward $100,000 on Wednesday, after falling back below that level in the past few days. It traded at around $99,380 on Wednesday afternoon and is still more than 8% below its all-time high at $108,309 reached on Dec. 17.

The macroeconomic and regulatory setup is bullish for the crypto, Samir Kerbage, chief investment officer at Hashdex, said in an interview.

Kerbage said that he expects global liquidity to increase as the Federal Reserve and other central banks likely continue to cut interest rates this year, which would likely benefit cryptocurrencies.

Following a cooler-than-expected core December consumer-price index reading on Wednesday, fed-funds futures traders have priced in a roughly 50% probability the Federal Reserve will deliver the equivalent of two 25-basis-point rate cuts by year-end, up from around 40% on Monday.

Crypto bulls have also been expecting the regulatory environment to become more friendly to digital assets after President-elect Donald Trump returns to the Oval Office on Jan. 20. Trump has vowed to build a strategic bitcoin reserve in the U.S., and said he would nominate former SEC Commissioner Paul Atkins, who is considered hospitable to the industry, to serve as chair of the securities regulator.

Meanwhile, several “on-chain” metrics indicate that bitcoin has not yet reached a cycle peak and has room to run higher, according to analysts at crypto asset manager 21Shares. This type of on-chain analysis examines data directly recorded on a blockchain network to gain insights into market trends or investor behavior.

Crypto analysts often divide bitcoin’s price performance into four-year cycles — each of which see it experience four phases, including breakout, hype, correction and accumulation. 

To be sure, launched in 2009, bitcoin has a relatively short history. With such a small sample size, its historical price data may not carry a lot of weight. And of course, past performance isn’t necessarily indicative of future performance.

The introduction of bitcoin exchange-traded funds in early 2024 and increased institutional participation in the crypto market might have also changed the behavior of some key metrics compared to previous cycles, noted the 21Shares analysts.

Find Frances Yue on X to share your thoughts on where crypto is at in its current cycle.

MVRV Z-score

The so-called market value to realized value Z-score, or MVRV Z-score, measures by how many standard deviations a crypto’s market value differs from its realized value, or the cumulative value of all coins at the price of their last movement. 

A MVRV Z-score above 7 typically points to a market top, while values below 0 tend to suggest potential bottoms, according to the 21Shares analysts.

For now, the MVRV Z-score stands at between 2.5 and 3, indicating a potential local top, according to the analysts. However, the number is still well below 7, which is historically associated with major cycle tops. 

If the realized price remains stable, bitcoin will have to exceed $200,000 for the MVRV Z-score to reach 7, the analysts noted.

Photo: 21Shares; Glassnode

Net unrealized profit and loss

Net unrealized profit and loss — an on-chain metric that shows whether the bitcoin market is in a state of profit or loss as a whole if bitcoin were sold at the current price — also shows that the crypto has not reached a cycle peak yet. The net unrealized profit and loss is the difference between bitcoin’s market cap and realized cap, divided by market cap.

If the number is positive, it means that the market as a whole is in profit, and vice versa.

As bitcoin has traded near $100,000, its net unrealized profit and loss has been in the range of 0.5 to 0.75, indicating a potential selling opportunity. However, it has not exceeded 0.75 yet — which, if reached, would point to a sentiment of euphoria or greed, indicating a market peak, the analysts said. 

Long-term holder sell-side risk ratio

The pullback bitcoin experienced last weekend and earlier this week was mostly driven by short-term holders, or those holding the crypto less than 155 days, according to the 21Shares analysts. 

However, potential selling pressure from long-term holders usually plays a bigger role on bitcoin’s price, noted the analysts.

The bitcoin long-term holder sell-side risk ratio — which measures the ratio of total realized profits and losses to the realized market capitalization of bitcoin’s long-term holders — reached roughly 0.4% when bitcoin hit its all-time high in mid-December.

Photo: 21Shares; Glassnode

The value is still much lower than it has been at historical market peaks. On-chain analysts tend to consider a market entering an overheated state when the ratio nears or exceeds 0.8%, the 21Shares analysts noted.

Crypto in a snap

Bitcoin BTCUSD rose 5.8% over the past seven days, to around $99,380 at the time of writing Wednesday. Ether ETHUSD gained 2.7% over the past seven days, to around $3,388, according to Dow Jones Market Data.

Source: Marketwatch

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