Acceleration of price action
Bitcoin's spot price caught the demand this week, climbing back up to $69,000, inching ever closer to the $73,000 ATH set in March. The market is trading just -6.8% below that peak, which has reassured many investors after seven months of sideways trading and volatile conditions.
If we measure the depth of drawdowns relative to the ATH over time, we can see that the severity of these drawdowns is more consistent with the 2021 bull market cycle and less consistent with the 2019 and 2022 bear markets.
We can further profile the market's resilience by comparing the spot price and key technical pricing levels. This rally has seen the market break through the combined resistance of the 200DMA 🟢 and 111DMA 🟣, which Bitcoin investors tend to react to.
Interestingly, the 365D SMA 🔵 has historically acted as either support or stubborn resistance at macro market inflection points. Most recently, the 365DMA acted as strong support during the Yen Carry reversal on August 5th and has defined the lower boundary of the prevailing macro uptrend to date.
In terms of Fibonacci retracement levels, the spot price is mostly limited by the ATH level and the -23.6% area, acting as a general lower boundary for the entire range of price movement.
Bitcoin trading within these boundaries for months is highly unusual, highlighting how unique this sideways and volatile period has been. Typically, the Bitcoin market rallies to new ATHs or sells off more sharply, making this period of consolidation intriguing.
Key pricing levels in the network
Net capital inflows into Bitcoin also accelerated, increasing by $21.8 billion (+3.3%) over the last 30 days. This resulted in the Realized Cap reaching a new ATH, exceeding $646 billion.
This suggests that liquidity across the asset class is growing, with strong capital inflows supporting price gains.
The AVIV ratio is a fundamental metric in the blockchain analysts' toolkit that estimates the gain/loss on securities held by active investors (by discounting inactive assets such as lost and long-dormant supplies).
The AVIV ratio has been trading above its historical average since the start of the year and has bounced strongly from that average since yen trading ceased on August 5. Overall, this is a constructive signal, suggesting that investor returns remain relatively resilient and that active investors have been protecting their underlying value in recent months.
Additionally, we note that the AVIV ratio has not exceeded +1SD since the March ATH, highlighting the potential upside if positive price momentum is established.
We can use key price levels on the chain to build a framework for thinking about Bitcoin market cycles. This can be thought of within the following framework:
🔴 Deep bear market: prices are trading below the strike price.
🔵 Early bull market: prices fluctuate between the realized price and the true market mean.
🟠 Enthusiastic bull market: prices fluctuate between ATH and true market average.
🟢 Euphoric bull market: prices are trading above the ATH of previous cycles.
Price is attempting to move from an Enthusiastic Bull Market mode to a Euphoric Bull Market, marked by a sustained break above the 2021 ATH of $69K. This level was briefly broken during the March 2024 peak, but profit taking was too strong at the time, requiring a period to cool investor excitement.
We can also estimate the unrealized gains as of 2015 for the short-term holders cohort, which can be considered an indicator of recent buying sentiment in the market.
The spot price is currently trading above the average purchase price of all subsets of short-term holders' cohorts. This means that almost all recent buyers have unrealized profits, highlighting the relief this rally has brought investors.
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