Investing in Bitcoin ETFs: Six Charts for Investors
Several spot Bitcoin ETFs have been listed! This article uses six charts to guide you on how to invest in Bitcoin, assess risks, and navigate bear and bull markets.
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.
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.
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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.
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