A bitcoin market cycle analysis based on MA, Z-Score, reserve risk
Therefore, despite compared with the previous two halving cycles, the emergence of factors, such as the Bitcoin market cap gets bigger and the prosperity of the derivatives market weakens the bitcoin’s volatility, many still believe that the third halving will definitely increase Bitcoin price by more than 10 times.
Figure1: Bitcoin waves
Moving Average (MA)
Bitcoin Investor Tool = MA730 (BTCUSD) and MA730*5 (BTCUSD)
Figure 2: Bitcoin 2y MA ＆ 2y MA*5 (Source: lookintobitcoin.com)
Altman Model (Z-score)
Realized Cap generally represents the price of large over-the-counter transactions. According to BTC.com data, as of Jan 3, 2020, the top 0.000349% addresses hold 15.14% of Bitcoin. The Bitcoin market is still a highly concentrated market, and to a certain extent, large off-exchange transaction prices can better represent the fair price of Bitcoin.
The calculation of Z-Score is the difference between market value and fair value, divided by the standard deviation of both data. Z-Score can be used to identify periods when Bitcoin is extremely over or undervalued relative to its ‘fair value’. As can be seen from Figure 3, when the market value of Z-Score is abnormally higher than the fair value, it will enter the red area, indicating that it has reached the top of the current market cycle. Contrarily, Z-Score will enter the green zone when the fair value is abnormally higher than the market value, indicating that the bottom of the current market cycle has been reached. Currently, a new green area is approaching.
Figure 3: Bitcoin Z-score Model (Source: lookintobitcoin.com)
The following figure shows the destruction of bitcoin-days with different holding periods. The periods are as low as 1 day and 7 days, and as high as 3 years and 5 years. The short-term holding represents demand and long-term holding represents supply. As seen from the figure, each round of BTC price surge is driven by a new demand for bitcoin hoarding.
Figure 4: The destruction of bitcoin-days with different holding periods (Source: charts.woobull.com)
Figure 5: Bitcoin HODL Capitalisation (Source: charts.woobull.com)
Reserve Risk = Bitcoin Price / HODL Bank
Figure 6: Reserve Risk (Source: lookintobitcoin.com)
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.