The team at Interdax, a digital assets derivatives trading platform, notes that after quite an eventful year, Bitcoin’s (BTC) price closed considerably higher than the all-time high the digital asset had set in December 2017. The new year 2021 was also kicked off with a “swift advance” to $42,000 by January 8, before BTC-USD “reversed sharply and found support near $30,000,” the Interdax team confirmed.
As mentioned in a report released on January 20, 2020, by Interdax:
“With Bitcoin now trading around $35,000-$36,000, we … [can confirm] … the rapid ascension of the price of BTC in the past few months to fresh highs, so far outpacing the price performance witnessed after the third block subsidy halving in 2016/2017. Previous cycles topped out between 10–18 months into each epoch.”
One Bitcoin valuation metric that may be used to identify or estimate a potential top is the Market Cap to Thermocap ratio. According to this metric, Bitcoin is not yet overvalued when compared to the “thermocap.” This particular indicator also signalled that the Bitcoin market had been “overheated” back in December 2013, when the ratio had managed to enter the red zone and accurately marked the top of that crypto market bull cycle, after which BTC fell from over $1,100 to a bottom of around $170.
While referring to another market performance indicator, the Puell Multiple, which is an on-chain metric related to cryptocurrency miners, the Interdax team points out that the Bitcoin market is “not yet overheated.” (Note: to view charts associated with these metrics, check here.)
“Looking at the technical indicators, the bitcoin price has moved further away from the 200-day moving average (MA) ….In recent weeks, the Mayer Multiple has hit the 2.4 threshold several times. For values below 2.4, it is known as the accumulation zone where it has been profitable buying and holding bitcoin. Once the Multiple moves above 2.4, it has historically been followed by sharp reversals.”
As noted by Interdax, the Mayer Multiple “clearly marks $42,000 as a top since the value moved above 2.4.” But the report points out that it’s “not as simple as that, as observing the 2017 bull run, we see that the 2.4 threshold was tested several times before the ~$19,700 peak.”
Interdax adds that the Pi Cycle Top Indicator “suggests that $42,000 was not the peak of the current run and that BTC-USD has room to go higher.”
“Despite the price of Bitcoin currently being roughly double the previous all-time high from December 2017, coins that have not moved in the past 3 or 5 years have not reached the highs seen during the late stages of the 2016-2017 bull run….the 5-year dormant circulation has so far only spiked as the price of Bitcoin moved above $13,900, the 2019 high. Even since the price pierced the $40,000 handle, Bitcoins that have remained dormant for more than 5 years were barely transacted compared to the 2016-2017 bull cycle.”
Interdax also mentioned that a “highly anticipated” Bitcoin network upgrade will most likely go live during H1 2021, the Schnorr-Taproot-Tapscript.
The report also noted that the fallout of the Covid-19 pandemic “means that interest rates are likely to remain near the zero lower bound and there will be political pressure for more stimulus from policymakers.” The report added that fixed supply assets like Bitcoin and commodities are now likely to outperform as “inflation expectations start to grow.” The report confirmed that the USD’s M2 money stock “grew around 20% in 2020, compared to the annualised growth of 1.8% in Bitcoin’s supply.”
The report added:
“Institutional adoption of Bitcoin is set to continue, with the end of 2020 marking the entrance of a new type of institutional investors, those where committees make the decisions which will give Bitcoin more legitimacy going forward.”