Interpretation of crypto market trends from nine indicators: 8.35 million BTC is in a loss, and many indicators have fallen to historical lows

Since the beginning of this year, due to the multiple influences of tightening monetary policies in many countries and repeated global epidemics, the crypto market has turned into a violent downward trend. According to CoinGecko, the total market capitalization of the crypto market fell below the $1 trillion mark on June 14, the first time since February 2021. So far, the total market value of the crypto 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 calculated by Alternative 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 has compared and analyzed the performance of 9 market indicators of the representative asset BTC during 3 market downturns since January 1, 2017. Among them, the three market downturn periods were selected as August 1, 2018 to March 31, 2019, March 1, 2020 to June 30, 2020, and April 1, 2022 to June 13, 2022 day, because the highest value of BTC price in this time domain does not exceed the previous high on the left side and contains at least one lowest value. The analysis found:

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

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 both in comparison 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 than the circulating value brought 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 about 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.

01

Current market prices are further defoamed 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.

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

The second aspect to measure 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 the 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 and is undervalued. is more likely.

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.

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

Mining is the underlying supporting industry of the crypto industry and the actual source of value for crypto 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 there is a premium between the current price and 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 average value of BTC’s historical Market Cap/Thermocap Ratio (MA7) 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, compared to the average Market Cap/Thermocap Ratio in the August 2018-March 2019 and March 2020-June 2020 periods, which were as low as 0.0000005342 and 0.0000004857, respectively, this value is much higher for the current period. High, that is, the deviation of current prices from actual values ​​is still higher than that of the previous two downturns.

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

Taken together, 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 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 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 about by scarcity will surpass other values.

02

The current losing stake is 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 at the time of the last move, as of June 13, a total of about 8.35 million BTC was 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 value of the 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 during the period from March 2020 to June 2020, but still lower than the period from August 2018 to March 2019. The average value of about 8.03 million BTC. 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.

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

The 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 overall, there are still more winning chips than 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 and loss chips 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 approximately 1.233 and 2.878, respectively, compared to the average for the current period 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 have higher returns. The ratio between the two is SOPR Ratio, which is bounded by 1. The greater the value is, the higher the long-term profit is, and the more likely the market is at the top. The smaller the value, the higher the short-term profit, 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. However, as of June 13, the value has fallen to 0.76, which means that for now, short-term investors have higher returns, and short-term investor returns are at historically high levels, which means that 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, i.e., 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.

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

Still, 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, and the more attractive the investment return is. On the contrary, the lower the confidence and the higher the price, the less attractive investment return. 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 the 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.

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

In 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.

03

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 two periods from August 2018 to March 2019 and from March 2020 to June 2020 were 628,500 and 825,600, respectively, both lower than the current period average of 930,400.

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

Secondly, 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 index for the two periods from August 2018 to March 2019 and from March 2020 to June 2020 was 13.53 days and 11.19 days, respectively, both closer to the historical mean and higher than the mean of the current period . 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.

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

The turnover ratio 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 turnover frequency, the average turnover rate of the current cycle is also significantly higher than the average of 3.81% and 3.01% in the two periods from August 2018 to March 2019 and from March 2020 to June 2020. That is, even if it is also a market downturn, the current period has faster capital flows and more active capital.

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

In general, although there is still a gap between individual indices 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.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/interpretation-of-crypto-market-trends-from-nine-indicators-8-35-million-btc-is-in-a-loss-and-many-indicators-have-fallen-to-historical-lows/
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