Key Takeaways
- The Net Unrealized Profit/Loss indicator fell below 50.
- Transaction and Address stats have fallen since March 2024.
- The MVRV ratio has generated a bearish divergence.
Bitcoin (BTC) market cycles often have similar characteristics near the tops. One such feature is the bearish divergence of long-term indicators during a period, a sign of weakness that frequently leads to trend reversals.
Since the BTC price has rallied nearly 30% since the beginning of April, now is a good time to look at some charts to determine whether the Bitcoin increase is a relief rally or the final leg of the market cycle.
Bitcoin’s NUPL Reading
The Net Unrealized Profit/Loss (NUPL) indicator measures the market’s unrealized profit or loss divided by market capitalization.
The indicator helps determine if market participants feel euphoria, noted by high values, or despair, indicated by low values.
Historically, Bitcoin market cycle tops have occurred at NUPL values above 0.6.
In the current market cycle, the NUPL has twice reached a high of 0.64 and is currently at 0.59.
While the actual value is slightly lower than the previous cycle, a bearish divergence (red line) has existed since March.
Such a bearish divergence marked the top of the previous and first market cycles.
Another important bearish signal is the decline below 0.5. Historically, there have been false breakdowns under this line (red circle), but the second breakdown always confirms that the bearish trend has started.
Transactions and Addresses Fall
Another reading that has generated a bearish divergence is the number of transactions and addresses.
While the number of transactions reached new highs between March and October 2024, it has fallen noticeably since, creating a bearish divergence with the recent BTC high.
The number of active addresses was steadier in the years prior, but dropped off noticeably after the March 2024 high.
Therefore, the network activity does not support the ongoing Bitcoin price increase.
MVRV Bearish Divergence
The final on-chain Bitcoin indicator that has generated a bearish divergence is the MVRV.
The MVRV Ratio is an on-chain indicator that determines whether an asset is over- or undervalued by comparing its market value to its realized value.
The MVRV ratio reached its cycle high of 2.74 in March 2024. While the price reached a new all-time high in January, the indicator did not.
The movement created a bearish divergence (red) similar to the NUPL one.
Moreover, while the BTC price increased in April, the MVRV trailed the price considerably.
Therefore, the indicator is unlikely to reach a new all-time high even if the BTC price does so.
New Highs Unlikely
The Bitcoin price has shown impressive strength by bouncing since its April lows, nearing $100,000.
However, three on-chain charts suggest the Bitcoin cycle has ended, and the bounce is just a relief rally.
NUPL, Transaction stats, and MVRV ratio created notable bearish divergences near the December highs, making it likely that the bearish trend started.
One argument against this high is the lack of a bearish signal in the Pi Cycle Top indicator, one of the few positive signs left for Bitcoin.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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