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In the second half of 2023, Bitcoin has emerged as a formidable force, surpassing traditional financial assets. Despite a remarkable surge of over 150% this year, some investors, haunted by the 2022 bear market memories, might be hesitant to embrace the current bull run. Anchored to the past, some view Bitcoin as potentially overvalued, bracing for an imminent price correction. However, anchoring biases may prove misleading as we explore three vital indicators that suggest Bitcoin’s ongoing bull run has just begun.
As we delve into the crypto space, it becomes apparent that traditional finance investors may fall prey to cognitive biases, such as anchoring, causing them to await more favorable entry points based on historical market norms. In contrast, three robust indicators – the Puell Multiple, MVRV Z-score, and Mayer Multiple – illuminate a different narrative. These metrics, which meticulously scrutinize Bitcoin’s blockchain activity, miner flows, and moving averages, present compelling evidence that the crypto is poised for further growth.
In this blog, we will unravel the intricacies of these indicators, painting a vivid picture of why the current bull run may just be the beginning of an even more remarkable journey for Bitcoin.
Let’s begin!
#1 Puell Multiple
The Puell Multiple is a valuable indicator that measures the U.S. dollar value of daily Bitcoin issuance relative to the 365-day moving average of the dollar value of issuance. It helps assess the profitability of miners and potential market pressures. According to Glassnodes, the Puell Multiple stands at 1.53, well below the red zone above four, indicating room for growth. Analysts believe that the upcoming Bitcoin mining reward halving in March 2024 could further boost the crypto’s price, potentially leading the Puell Multiple back into the accumulation zone suggesting a positive outlook for the future.
What is Puell Multiple?
The Puell Multiple serves as a crucial metric in assessing the profitability of Bitcoin miners and the potential impact on market dynamics. Its calculation involves comparing the U.S. dollar value of daily Bitcoin issuance with the 365-day moving average of the issuance value.
#2 MVRV Z-score
The Market Value-to-Realized Value (MVRV) ratio’s Z-score provides insights into the deviation of Bitcoin’s market capitalization from its realized or fair value. According to Glassnode, with the Z-score currently at 1.6, Bitcoin appears far from being overvalued. Historically, Z-scores above eight have signaled overvaluation and bull market tops. Conversely, negative values have indicated discounted prices and bear market bottoms. The current Z-score of 1.6 suggests that Bitcoin may continue its rally into the next year, supported by analysts’ expectations.
What is MVRV Z-score?
The MVRV Z-score is a comprehensive metric that assesses the deviation of Bitcoin’s market capitalization from its realized or fair value, providing valuable insights into potential market conditions.
#3 Mayer Multiple:
The Mayer Multiple, developed by Bitcoin investor Trace Mayer, compares Bitcoin’s market price to its 200-day Simple Moving Average (SMA). This indicator helps identify overbought or oversold conditions. As of now, the Mayer Multiple is 1.404, indicating that Bitcoin’s price has ample room to rally before being considered overbought relative to its 200-day SMA. The 200-day SMA is a widely followed gauge of long-term trends, and historically, assets are considered to be in a bull market when their value is above the 200-day SMA. This suggests that Bitcoin still has room for bullish momentum.
What is Mayer Multiple?
The Mayer Multiple provides insights into the relationship between Bitcoin’s current market price and its 200-day simple moving average (SMA).
Bottomline Thoughts
These three indicators – Puell Multiple, MVRV Z-score, and Mayer Multiple – paint a positive picture of Bitcoin’s future performance. While past experiences may make some investors hesitant, it is essential to consider the evolving market dynamics and the unique characteristics of the crypto space. As we approach the next halving and witness favorable readings from these indicators, the evidence suggests that Bitcoin’s bull run may indeed have plenty of steam left. Investors should remain cautious and make informed decisions based on a comprehensive market indicators and trends analysis.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
