Bitcoin recently surged past the $90,000 milestone following President-elect Trump’s electoral victory, capturing significant attention across markets. Yet, this rally is driven by more than just political developments.
In this article, we break down six key charts that provide critical insights into Bitcoin investing, helping you assess risks, understand market trends, and develop strategies for navigating both bear and bull markets.
Whether you’re a seasoned crypto investor or just starting out, this guide equips you with the tools to make informed, data-driven decisions in a rapidly evolving landscape.
I. Is Bitcoin in a Bubble? Observing Two Indicators
Indicator 1: Global Central Bank Money Supply
Bitcoin often experiences an uptrend when there is an expansion in the global central bank money supply. Given its inherent feature of having a "limited supply," Bitcoin's value typically sees an uplift when there is ample liquidity in the market.
Since the 2008 financial crisis, we have been analyzing the annual growth in M2 money supply from the world's major central banks (the Fed, ECB, Bank of Japan, People's Bank of China,) and it has consistently shown a positive correlation with improved Bitcoin price performance, as indicated by highlighted green boxes. Conversely, a decline or negative growth in money supply tends to weaken Bitcoin's price performance. Notably, there was a brief negative turn in money supply in early 2022-2023, contributing to a downturn in Bitcoin. However, the recent positive reversal in money supply has again revitalized Bitcoin's upward trend.
（Customize | View Chart）
Indicator 2: Bitcoin MVRV Z-Score
The MVRV-Z Score is an indicator that compares the market cap to the realized cap through the following formula: MVRV-Z Score = (market cap – realized cap) / standard deviation (market cap).
The realized cap is derived from Bitcoin transactions on the blockchain, considering the "last moved value" of all bitcoins in the chain. While the MVRV-Z Score generally aligns positively with Bitcoin trends, a swift increase in this score over a brief period indicates a potential risk of bubble burst. Presently, the MVRV-Z Score is gradually ascending from its low point, yet it remains within historical average levels, displaying no clear signs of a bubble burst.
（Customize | View Chart）
II. Find the Best Entry Point from the Miner's Perspective
As miners are crucial participants in the cryptocurrency market, understanding their operational status is important for understanding the current condition of Bitcoin market.
Indicator 3: Average Cost of Producing Each Bitcoin
To estimate the average cost of producing each Bitcoin, we use global Bitcoin electricity consumption and the daily issuance of new bitcoins, data provided by the University of Cambridge.
Historical trends suggest a correlation between the expenses tied to Bitcoin mining and the cryptocurrency's prices. When the price of Bitcoin falls below the production costs for miners (illustrated by a Mining Costs-to-Price Ratio greater than 1), miners may find it unprofitable to continue their operations and might leave the market. This decrease in the supply of Bitcoin often serves as a signal for the beginning of an upward trend in Bitcoin prices.
（Customize | View Chart）
Indicator 4: Puell Multiple
The Puell Multiple is calculated by dividing “the daily issuance value of Bitcoin (in USD)” by “the 365-day moving average of the daily issuance value.” It’s an indicator of the present state of miner profitability.
Boost your performance—unlock the full power of MM Business today!
Must-See: Stay tuned and gain a sharper edge in observing the market with Dr. Yardeni!
