9 major indicators to judge the market trend: 8.35 million BTC is at a loss, and many indicators have fallen to new lows

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9 major indicators to judge the market trend: 8.35 million BTC is at a loss, and many indicators have fallen to new lows
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Author: Carol

Since the beginning of this year, due to the multiple influences of tightening monetary policies in many countries and repeated global epidemics, the cryptocurrency market has fallen into a violent downward trend. The total market capitalization of the cryptocurrency market fell below the $1 trillion mark on June 14, the first time since February 2021, according to CoinGecko. So far, the total market value of the cryptocurrency market has “evaporated” about $1.32 trillion this year, a drop of more than 57%. In the face of the decline, the market sentiment is very “panic”, and the Fear & Greed index by Alternative’s statistics has been below 10 recently, at an extremely low level since 2018.

Needless to say, the market has entered a downturn. The new question is, how far has the market fallen now? Will it continue to fall? Bear market data from previous years may provide some reference.

PAData compared and analyzed the performance of 9 market indicators of the representative asset Bitcoin (BTC) during 3 market downturns since January 1, 2017.

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Among them, the three market downturn periods are selected as August 1, 2018 to March 31, 2019; March 1, 2020 to June 30, 2020; April 1, 2022 to June 13, 2022 , because the highest value of the price of BTC in this time domain does not exceed the previous high on the left and contains at least one lowest value. The analysis found:

1) The “bubble” of the current BTC price has been squeezed out to a large extent, but compared with the previous two market downturns in history, the current price is comparable to the fair value provided by the transaction and the actual value provided by the mining industry. There is still room for continued pressure. But the current price has deviated more from the circulating value brought about by the scarcity of supply. The extent to which future price deviates from value actually depends to a large extent on the extent to which scarcity is recognized by the market, or in other words, under what circumstances the value brought by scarcity will surpass other values.

2) The current market is the same as the previous two downturns in history. Loss chips are rapidly increasing, profit and loss chip ratios are further reduced, short-term investment returns are higher, and market reserve risks are low. This suggests that the market game may intensify, but the return on investment is attractive at this time. It is worth noting that at the end of the previous two downturns, the three indicators of profit-to-loss chip ratio, SOPR Ratio and reserve risk all showed an upward trend, or at least remained relatively stable, but this has not been seen in the current period.

3) Compared with the previous two historical downturns, on-chain users in the current period are in a more active state. In addition, funds during the current period are also more active, not only changing hands more frequently, but also having a higher turnover rate. This usually indicates that the market is still highly volatile.

marketThe current market price has further de-foamed,but still above fair value

Price is based on value, and moves up and down around value. The assessment of the value of BTC usually comes from 3 aspects, the first aspect is the fair value of the actual transaction. The MVRV Z-Score indicator is usually used to evaluate the degree of deviation of the price of BTC relative to the fair value, that is, the degree of deviation of the current price from the transaction price when the asset was last moved. The lower the value, the lower the price is, the lower the fair value. This usually occurs at market bottoms and vice versa.

According to statistics, the average value of BTC’s historical MVRV Z-Score (MA7, omitted below) since 2017 is 2.07, the average value from April 2022 to the present is 0.876, and the minimum value is as low as 0.358, that is, the current MVRV Z-Score has been At historically low levels, which indicates that the current price deviates very little from the fair value of the transaction, the price is “de-bubble”, but still above the fair value.

Moreover, the mean MVRV Z-Score for the two periods from August 2018 to March 2019 and from March 2020 to June 2020 were 0.127 and 0.775, respectively, and the minimum values ​​were -0.471 and -0.121, both lower than The mean and minimum values ​​for the current period. This means that compared to the previous two market downturns in history, the current degree of price defoaming is less, and the MVRV Z-Score has not yet been negative, that is, the price has not fallen below the fair value of the transaction.

marketThe second aspect of measuring the value of BTC is the circulating value brought about by the scarcity of supply. The S/F model is currently the mainstream model for evaluating the circulation value in the market. The S/F Deflection indicator based on this can understand the degree of deviation of the price of BTC relative to the circulation value. The indicator takes 1 as the dividing line. If the value is less than 1 and the smaller it is, it means that the current price of BTC is lower than the circulating value, and the current price is more undervalued, which usually occurs at the bottom of the market, and vice versa. According to statistics, the average historical S/F Deflection (MA7) of BTC since 2017 is 0.848, that is, on the whole, even if BTC is currently “diving”, its price is still higher than the circulating value. Next, let’s look at the performance of this indicator during the three market downturns. The average value from April 2022 to the present is 0.3307, which is significantly less than 1, and there is a historical low value, that is, the current price of BTC has a significant negative deviation from the circulating value. The probability of underestimation is high.

For comparison, the mean values ​​of S/F Deflection in the two periods from August 2018 to March 2019 and from March 2020 to June 2020 were 0.7769 and 0.9092, respectively, both <1. It can be seen that during market downturns, the price of BTC is usually undervalued relative to its circulating value. Moreover, the average S/F Deflection in the current period is lower than in the previous two downturns, which means that the current price is more likely to be undervalued.

marketMining is the underlying supporting industry of the cryptocurrency industry and the actual source of value for encrypted assets. Among them, the total cost of miners to maintain network security provides a third source of BTC value assessment. Market Cap/Thermocap Ratio is an indicator currently on the market to measure whether the current price is at a premium relative to miners’ security spending. The lower the value, the closer the current value is to the miners’ security spending, and the greater the pressure on miners to “shut down”. Large, this usually also occurs at the bottom of the market and vice versa. According to statistics, the historical Market Cap/Thermocap Ratio (MA7) average of BTC since 2017 is 0.000001049, and the average value from April 2022 to the present is 0.0000008999, which is significantly lower than the historical average and is at a historically very low level, which means that the current The price has fallen to a range close to the actual value, and the deviation from the actual value has been greatly reduced.

However, this value for the current period is much higher than the average Market Cap/Thermocap Ratio for the periods August 2018-March 2019 and March 2020-June 2020, which were as low as 0.0000005342 and 0.0000004857, respectively. High, that is, the deviation of current prices from actual values ​​is still higher than that of the previous two downturns.

marketOn the whole, the current “bubble” of BTC prices has been squeezed out to a large extent, but compared with the previous two market downturns in history, the current price is much lower than the fair value provided by the transaction and the actual value provided by the mining industry. There is still room for continued pressure. But the current price has deviated more from the circulating value brought about by the scarcity of supply. The extent to which future prices deviate from value actually depends to a large extent on the extent to which scarcity is recognized by the market, or under what circumstances the value brought about by scarcity will surpass other values.

The current losing chips are significantly higher than the historical average,But the return on investment is more attractive

Profit and loss chip distribution, long-term and short-term investment returns and investment confidence are also three important dimensions to observe the market. From the point of view of the distribution of profit and loss chips, that is, from the perspective of the number of assets whose price was higher than the current price during the last move, as of June 13, a total of about 8.35 million BTC were in a state of loss. You must know that since 2017, the average number of BTC losing chips has only been about 3.95 million BTC, that is, the current number of losing chips has been significantly higher than the historical average and is at a historically high level.

In addition, the average number of losing chips during the current period is about 6.83 million BTC, which is higher than the average of about 5.61 million BTC from March 2020 to June 2020, but still lower than the average of about 5.61 million BTC from August 2018 to March 2019. The average value of about 8.03 million BTC during the month. In general, the number of losing chips during a market downturn is higher. It is worth noting that the number of losing chips during the current period has been on an upward trend, and if this trend continues, the average losing chips during the current period will likely continue to grow even more than the August 2018-March 2019 period.

marketThe data performance of the winning chip ratio is consistent with the data performance of the losing chips. Since 2017, the average profit-to-loss chip ratio of BTC is 31, which means that on the whole, the winning chips are still more than the losing chips, and in extreme cases, most chips are profitable. However, as of June 13, the profit-loss chip ratio has dropped to 1.252, which is at an extremely low level in history, that is, the gap between the current profit chip and the loss chip has further narrowed, and the market game may intensify.

The average P/L chip ratio for the two periods August 2018-March 2019 and March 2020-June 2020 was about 1.233 and 2.878, respectively, compared to the average for the current period, which was at 1.233 during the market downturn. It is also at a lower level in a horizontal comparison.

Under different market trends, investors’ holding time is also very different. Generally speaking, if the market is rising to the top, the volatility is small, and the investor’s long-term (≥155 days) returns may be higher. On the contrary, if the market is falling to the bottom, the volatility is large, and the investor’s short-term (>1 hour) income may be higher. and less than 155 days) may be higher. The ratio of the two is SOPR Ratio, which is bounded by 1. The greater the value is, the higher the long-term profit is, the more likely the market is at the top, the smaller the value is, the higher the short-term profit is, and the more likely the market is at the bottom. According to statistics, the average historical SOPR Ratio of BTC since 2017 is 2.88, which means that long-term investors still have higher returns so far. But as of June 13, the value has fallen to 0.76, which means that for now, short-term investor returns are higher, and short-term investor returns are at historically high levels, which means the market is closer to the low.

From the mean point of view, the mean value of SOPR Ratio in the current period is 1.0948, which is close to the mean value of 1.0692 from March 2020 to June 2020, and both are slightly higher than 1, that is, during these two downturns, long-term investment Earnings are still slightly higher. But the average for the period from August 2018 to March 2019 was only 0.772, which was significantly lower than 1, meaning that short-term investors had higher returns at that time. But it is worth continuing to pay attention here that, from the trend point of view, the downward trend of this value in the current period is still very obvious.

marketStill, the return on investment in the current asset is attractive. Reserve risk is a commonly used indicator to measure market confidence. The lower the value, the higher the confidence and the lower the price, the more attractive the return on investment, and the lower the lower the higher the price, the less the investment return is.

According to statistics, the average historical reserve risk of BTC since 2017 is 0.0044, and the average value of the current range is 0.0019, which is lower than the historical average and close to the historical low, which shows that current investors still have confidence in BTC, and the return on investment is good. attractive. The average value of this value in the previous two historical downturns was 0.0025 and 0.0017, which were also at historically low levels. It can be seen that the commonality of the market downturn is that the risk of reserves is low.

marketIn general, the current market is the same as the previous two downturns in history. Loss chips are rapidly increasing, profit and loss chips are further narrowed, short-term investment returns are higher, and market reserve risks are low. This suggests that the market game may intensify, but the return on investment is attractive at this time. It is worth noting that at the end of the previous two downturns, the three indicators of profit-to-loss chip ratio, SOPR Ratio and reserve risk all showed an upward trend, or at least remained relatively stable, but this has not been seen in the current period.

The current active addresses are more, and the capital turnover rate is improved

Users and funds also have different active characteristics during market downturns. First of all, from the perspective of user activity, as of June 13, the number of active addresses on the Bitcoin chain was 893,900, slightly higher than the historical average of 815,400 since 2017. It can be seen that the current users on the chain are in a relatively active state. . And, compared to the previous two downturns in history, user activity during the current period is also higher. The number of active addresses in the August 2018-March 2019 and March 2020-June 2020 periods were 628,500 and 825,600, respectively, both lower than the current period average of 930,400.

marketSecondly, from the perspective of capital activity, the dormancy index refers to the average holding days of the destroyed tokens in each transaction. ), otherwise more short-term holdings of tokens enter circulation (usually sold). According to statistics, the average historical dormancy index of BTC since 2017 is 13.72 days, while the average in the current period is 6.87 days, which is significantly lower than the historical average. This means that the tokens currently being traded change hands more frequently. The average dormancy indices for the August 2018-March 2019 and March 2020-June 2020 periods were 13.53 days and 11.19 days, respectively, both closer to the historical mean and higher than the current period mean . This also shows that during the current period, even if it is also a downturn in the market, the exchange frequency of its trading tokens is relatively high, in other words, the capital activity is relatively high.

marketweekThe turnover rate is another indicator to measure the activity of funds. The higher the value, the faster the flow of funds, and vice versa, the slower the flow of funds. According to statistics, the average historical turnover rate of BTC since 2017 is about 5.29%, and the average value in the current period is 9.14%, which is significantly higher than the historical average. The flow is also faster. Moreover, like the frequency of hand changes, the average turnover ratio in the current cycle is also significantly higher than the average of 3.81% and 3.01% in the two periods of August 2018-March 2019 and March 2020-June 2020. That is, even if it is also a market downturn, the current period has faster capital flows and more active capital.

marketIn general, although there is still a gap between individual indexes and the bottom of the previous cycle, for medium and long-term currency holders who intend to hold for about 3 years, now may be a better window for gradual purchases and fixed investment.

This article uses 9 major indicators to judge the market trend: 8.35 million BTC is in a loss, and many indicators fell to new lows. The first appeared in the blocker.

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