Bitcoin has been consolidating around the $1 trillion market capitalization threshold for almost three months, which is a very healthy development during a bitcoin bull market. So, what’s happening behind the scenes, and how should investors be thinking about the recent price action of bitcoin?
Let’s dig in.
Long-Term Trend Still Clear: Bull Market Far From Over
While it is true that at the time of writing BTC is trading at a price it first saw 75 days ago, there is absolutely nothing to be concerned about in terms of the fundamentals and long-term outlook of the monetary asset. Many market spectators have been quick to call it a “top” because of the speculation occurring in the illiquid altcoin markets, but this is a shortsighted take that does not take into account the empirical data. New entrants and capital are entering the market every single day, and the fixed monetary policy of Bitcoin remains consistent.
Long-Term HODLers Are Accumulating
The long-term HODLer net position change, which measures the 30-day change in supply held by long-term bitcoin holders, recently flipped positive, and the data from Glassnode shows that over the last 30 days, HODLers have accumulated 93,638 BTC more than they have sold. This shows that the conviction of bitcoiners is not the least bit shaken in regards to the choppy price action, and they are viewing the period of consolidation as a buying opportunity.
Miners Are Accumulating
Not only have long-term HODLers been net accumulating over the last month, but miners are as well. Over the last 30-day period, miners have accumulated a net position of 5,459 BTC, a bullish development as miners are the only natural sellers in the market, since capital expenditure and operational expenses force operations to occasionally liquidate a proportion of their treasuries.
With hash rate lagging far behind price action over the past year, and a global semiconductor shortage occurring simultaneously, expect miners to continue to be net accumulators of BTC, as profit margins remain wide across the industry.
Another fascinating metric to look at is the Puell Multiple, which measures the dollar value of bitcoin issued to miners in relation to its 365-day moving average. The Puell Multiple measures when the market has run too far, too fast.
Obviously, the market value of new bitcoin issued greatly increases in a bull market, and this can be seen not only during the recent run up but also past bull market cycles following the halving. Currently, the Puell Multiple is at 2.5, following the healthy 75-day consolidation. When compared to previous bull markets, a similar pattern occurred around the $100 mark in 2012 and the $3,000 to $4,000 level during 2017.
Another promising metric which puts into context the exponential growth occurring around bitcoin and the Bitcoin network is realized market capitalization. Realized market capitalization shows the total market cap of bitcoin, but accounts for the time each UTXO was last moved in the calculation.
This measure can be thought of as a more reliable way to measure the true economic value of the Bitcoin network. Realized cap at the time of writing is sitting at $370 billion, increasing approximately $250 billion since November. To put this move into context, the realized capitalization of bitcoin at the height of the previous bull market was $90 billion. The recent parabolic rise in realized capitalization can be seen as an immense amount of capital flowing onto the network.
A very telling metric when determining how “overheated” the bitcoin price is, MVRV is the ratio between the market capitalization to the realized capitalization. Short-term price fluctuations occur on bitcoin as price is set on the margin, and…