Capriole Investments founder Charles Edwards recently shared a comprehensive analysis to understand the peak value of Bitcoin (BTC). Edwards notes that it's important to track specific metrics rather than setting price targets.
Edwards lists a few key metrics that he claims are crucial in determining Bitcoin's top cycle:
- Supply Delta + 90-Day CDD: These metrics moved vertically today, indicating a potential cycle top.
- Long-Term Investor Inflation Rate: Currently at 0.5, this rate still has a way to go until it reaches the 2.0 threshold, which typically indicates a high likelihood of the cycle peaking.
- Hodler Growth Rate: This metric peaks when Bitcoin's long-term investors start selling for a profit. The process has already begun and cycle tops typically occur when the Hodler Growth Ratio has not made a new top for 6-9 months.
- Bitcoin Extreme Metrics: Prolonged overfunding/basis/option values were a good warning sign last cycle. We've seen high values recently, but we're still a long way from what we saw in 2021.
- Dynamic Range NVT: This metric, which evaluates the relative value of the network by comparing on-chain transactions to Market cap, is currently in full value territory due to the increase in on-chain transactions from Ordinals.
- On-Chain Transaction Fees: High transaction fees indicate an increase in demand. Today's current wage decline is worth watching closely.
- Net Unrealized PnL (NUPL): NUPL in the “euphoria” zone is a classic indicator for market effervescence and is a zone to be more cautious.
- Volume Spent 7-10 years: Early big whales typically sell around cycle tops. The increased volume spent in 2024 indicates that this cycle is moving quickly.
- SLRV Ribbons: When SLRV Ribbons reaches a high and the slow moving average forms a rounded top and bearish trend, four risk signals are received.
- Dormancy Flow: Quite alarmingly today, Dormancy Flow has peaked significantly, indicating that the average age of coins spent is significantly higher in 2024.
- Percentage of Addresses in Profit: The longer more than 95% of addresses are in profit, the more likely it is that a cycle will peak.
- Mayer Multiple: Mayer Multiple values above 2.5 have marked all major Bitcoin cycle tops throughout history. According to the analyst, today this data is at 1.6, there is still some room for movement.
- US Liquidity: Liquidity drives markets. There is a very strong correlation between this chart and Bitcoin's price history. We have had possible signs of a (local) peak in the last two weeks.
Edwards concludes by emphasizing that monitoring these metrics is much more important than any prediction or price target. He also argues that 30% of metrics are at high risk today, justifying closer monitoring for a cycle top.
*This is not investment advice.