CryptoQuant, a major cryptocurrency analysis firm, recently shared an interesting analysis of the bullish potential in the cryptocurrency market.
The company's analysts closely monitor the Bitcoin Price Temperature (BPT), a unique metric that measures the number of standard deviations that the Bitcoin price deviates from the 4-year moving average.
According to analysts, BPT is a crucial tool for understanding and predicting market trends. This metric compares past cycles with the current “warm-up” before a bullish rally. BPT uses four key indicators:
- 4-Year Moving Average (Blue): This represents the average cost of Bitcoin over the last 4 years. It acts as a baseline or “norm” for the current Bitcoin price.
- 4-Year Moving Average +2 Sigma (Green): This indicates a price level that is 2 standard deviations above the mean. If the price reaches or exceeds this level, it could indicate that the market is potentially overvalued.
- 4-Year Moving Average +6 Sigma (Orange) and +8 Sigma (Red): These represent even higher levels of deviation from the norm. The higher the price relative to these levels, the more likely it is that the market is in a “bubble” or extreme overvaluation.
If BPT is above +2 sigma, investors may consider this as a warning of possible overvaluation and increased risk. However, during this year the price did not even rise to the level of BPT-2. According to CryptoQuant analysts, this situation can best be described as a “warming up” of the market ahead of a bull run.
*This is not investment advice.