Research Summary

The report discusses Bitcoin’s performance in the week, where it rallied to new yearly highs before selling off back to its weekly open. It highlights the resistance met by the rally, with several indicators suggesting near-term exhaustion. The report also explores various on-chain pricing models, the influence of Short-Term Holders (STHs) on price action, and periods of heightened fear and greed among these newer investors.

Key Takeaways

Bitcoin’s Round-Trip Performance

  • Bitcoin’s Rally and Sell-off: The report notes that Bitcoin opened at $40.2k, rallied to a new yearly high of $44.6k, and then sold off sharply to $40.2k. This round-trip performance suggests a degree of near-term exhaustion in the market.

On-chain Pricing Models

  • Active Investor Realized Price: This model computes a ‘fair value’ of Bitcoin based on the degree of supply tightness across the network. The report suggests that the path to a new All-Time High (ATH) involves major fluctuations around this ‘fair value’ model, currently at ~$36k.
  • Mayer Multiple: This model describes the ratio between price and 200-day moving average. The current value of the Mayer Multiple is at 1.47, close to the ~1.5 level which often forms a level of resistance in prior cycles.
  • NVT Price Model: This model seeks a fundamental valuation of the network based on its utility as a settlement layer for USD-denominated value. The recent rally printed one of the sharpest spikes in the NTV premium indicator since the market top in Nov 2021, suggesting a potential near-term ‘overvaluation’ signal relative to network throughput.

Short-Term Holders’ Influence

  • STHs and Price Action: The report highlights the outsized influence that new investors (STHs) have in shaping near-term price action. It notes that the recent rally to $44.2k provoked a high degree of STH profit-taking activity, suggesting this cohort acted upon their paper gains, taking advantage of demand liquidity.

Short-Term Fear and Greed

  • STH-Supply Profit / Loss Ratio: This tool identifies periods of heightened fear and greed among newer investors. The report notes that the October rally drove this metric well above the overheated level of 20, signaling a higher-risk structure and a similar ‘overheated’ condition to the NTV-Premium indicator.

Actionable Insights

  • Monitor Bitcoin’s Performance: Given the recent round-trip performance of Bitcoin, it would be prudent to closely monitor its price movements and market trends.
  • Consider On-chain Pricing Models: These models can provide valuable insights into Bitcoin’s ‘fair value’ and potential overvaluation or undervaluation signals. They can be useful tools for understanding market cycles and investor behavior.
  • Assess STHs’ Influence: The behavior of Short-Term Holders can significantly impact Bitcoin’s price action. Understanding their behavior patterns can provide insights into potential market trends and price fluctuations.
  • Identify Periods of Fear and Greed: Tools like the STH-Supply Profit / Loss Ratio can help identify periods of heightened fear and greed among newer investors, which can signal potential market tops or bottoms.

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