12 April, 2024

Analyst Unveils Key On-Chain Fundamentals for Bitcoin Market Cycles

01 Aug, 2023

21 Nov, 2023

  • On-chain indicators MVRV & Avg. Realized Price govern Bitcoin’s cycles, acting as key resistance and support levels.
  • MVRV’s z-score aids in spotting market tops and bottoms, offering a clearer picture of price trends.
  • Extended accumulation periods are allegedly crucial for Bitcoin’s bull market confirmation.

CryptoQuant, an on-chain data and analytics provider, has shed light on the crucial fundamentals that govern Bitcoin’s market cycles. Based on historical data and insightful analysis, CryptoQuant has identified two essential indicators, MVRV (Market Cap to Realized Cap Ratio) and Average Realized Price, that have consistently played pivotal roles in shaping the cryptocurrency’s price trends.

The first indicator, MVRV, which compares Market Cap to Realized Cap, provides a valuable measure of the network’s valuation and its deviation from “fair value”. When the exchange traded price of Bitcoin falls below this fair value, it has historically indicated a bear market, with prices consistently remaining below the Average Realized Price of short-term supply groups (1D-6M). On the flip side, during periods of market recovery and attempts to return to a bull market, the 1D-6M Average Realized Price acts as solid support, offering hope to bullish investors.

Similarly, the second indicator, Average Realized Price of medium-term supply groups (6M-2Y), reinforces the previous findings and adds affirmative certainty every time the market price crosses it. This serves as a crucial level of support during bearish phases and resistance during bullish phases, solidifying its significance in Bitcoin’s price movements.

A noteworthy development by “Awe and Wonder” according to a Woobull Charts report, in the MVRV indicator, introducing a z-score, has allowed for a clearer understanding of market cycles with tops and bottoms normalizing around common levels. This advancement enhances the ability to spot potential market tops and bottoms with increased accuracy.

While the MVRV and Average Realized Price indicators have proved their worth individually, they both equally contribute to defining the boundary between bearish and bullish sentiments, acting as crucial touchpoints for traders and analysts alike.

CryptoQuant’s insights also highlighted the importance of an extended accumulation period for Bitcoin. To confirm a bull market, Bitcoin needs to build enough momentum to break through the resistance posed by the mid-term average realized price. Simultaneously, the short-term data consistently exhibits positive responses and acts as a sturdy support level.


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