A new bull market has begun, changing course after more than a year of relentless declines in the cryptocurrency landscape, according to digital asset data and analytics firm CryptoQuant.
Recent gains belie what a brutal bear market and a โcrypto winterโ Has been. At $23,000, Bitcoin is still at a third of its all-time high of around $69,000 from just over a year ago. The precipitous declines have come at the hands of the Federal Reserve, whose inflation-fighting monetary policy and sharp interest rate hikes also sent the
Dow Jones Industrial Average
Y
S&P 500
in a twist last year. fraud accusations Y a series of bankruptcies in the entire crypto industry it only made things worse.
2023 has marked the beginning of a sea change in sentiment. Investors are optimistic that inflation is cooling off and that interest rates may even start to come down this year, and traders bidding for risk sensitive assets like cryptos and stocks in turn.
This optimistic attitude has now translated into bull market technicals, according to CryptoQuant. The indicator is in the group's proprietary PnL Index, which combines three different metrics into a single indicator of Bitcoin's market value. That figure has now surpassed its 365-day moving average.
โAlthough it is still possible for the index to fall back below, the CryptoQuant PnL Index has issued a definitive buy signal for Bitcoin,โ CryptoQuant detailed. in a note Wednesday night. "Historically, the index crossover has signaled the start of bull markets."
For those interested in the details, the PnL Index combines the MVRV, NUPL, and LTH/STH SOPR ratio into a single indicator. These are all various on-chain profitability metrics, which refer to measures based on blockchain data that underpins Bitcoin.
Market Value to Realized Value (MVRV) is a ratio of Bitcoin's market capitalization relative to its realized capitalization, or the price it last moved at, and is used to observe changes in market profitability.
Net Unrealized Profit/Loss (NUPL) looks at the difference between how many investors have unrealized gains versus those with unrealized losses, and is used to determine how profitable or unprofitable the Bitcoin network is as a whole.
The Spent Production Profit Ratio (SOPR) for Long-Term Holders (LTH) and Short-Term Holders (STH) reflects the realized gain or loss when transacting with Bitcoin on the blockchain over a period of time. determined, and similarly reflects profitability.
The confluence of these indicators on PnL gains confirms an early bull market "for now," according to CryptoQuant.
But there are still some signs of pessimism, the data and analysis team noted. This includes muted Bitcoin entries to exchanges and a significant lack of trading from major market participants.
However, the start of a new Bitcoin bull market may be on the cards. That is, until it isn'tโwith multiple technical metrics Y macro analysis that suggests this rally can be over the top and vulnerable. However, with Bitcoin prices rising once again on thursdaycryptocurrency traders will surely see the bright side.
Write Jack Denton at jack.denton@barrons.com