OKEx Weekly Update: May 16 – May 22
OKEx CEO Talk: Post-Halving – How to Assess the Bitcoin Market
Bitcoin has finally halved for the third time. I know a lot of you are eager to know whether the BTC price will move upward or downward. Judging from previous narratives, it will rise in the mid to long term, but plummet shortly after halving. Today I want to share my views with regards of the key on-chain and market data for assessing market sentiment and price implications.
Let’s dive in.
1. Unique Active Addresses
One of the most effective on-chain indicators for assessing the overall level of network activity and the valuation of Bitcoin is the unique addresses. It shows how many addresses that have been participated in sending or receiving activities on the blockchain.
In the post-halving period, the continuous rise of unique address is critical for keeping the BTC rally. A higher number could indicate that more users were transacting on the network, thus results in a higher valuation and a higher BTC price. Yet after the plunge on May 10, there weren’t a noticable increase in the number of unique active addresses, which might explain why the BTC price is now hovering around $8,000.
2. Hash Rate and Network Difficulty
Another clue to look out for after halving is hash rate and difficulty. As halving cut miners’ reward from 12.5 BTC to 6.25 BTC, a downward pressure on mining profitability is expected to increase, despite both hash rate and difficulty almost reached their all-time high prior to halving. Whether miners are willing to allocate their computing power into the network is a crucial indicator of BTC price. If they are confident, price will go up, or vice versa.
Not surprisingly, the hash rate has now dropped 15% 12 hours after halving due to the shutdown of some old mining machines (possibly the Antminer S9). As for how long it takes to return to the current level, it depends on the price change. If it rises rapidly, then the hash rate of the entire network will also rebound quickly.
3. Change of HODLer’s Net Position
I admire HODLers a lot – they are the true believers of Bitcoin, they believe in the crypto when no one else does. Therefore their stance on BTC price is possibly another key indicator for investors to evaluate the post-halving market, especially from a medium-term perspective as the accumulation and reduction of BTC could be a direct reflection of the sentiment of HODLers and whales.
Glassnode data shows that BTC HODLer net position has been staying positive for eight consecutive weeks prior to halving. With this trend ongoing, I think that HODLers will stay bullish for a short time after halving too.
4. Exchange Trade Volume
Social element is a unique part of the crypto market, it indicates how the community sees Bitcoin in the post-halving period. These patchy information landscape could strengthen investors’ tendency to make trade decisions based on their sentiment.
When the BTC market is anticipated as a bullish market, more investors will enter the market from exchanges. BTC balance on exchanges has just reached a 6-month low though, and we don’t expect a large volume in the near future (just like the FOMO happened in 2017). As reflected on BTC price, traders are not as positive as anticipated too in the short term.
5. MVRV Ratio & NVT Signal
The MVRV ratio helps predict BTC price by telling us whether the asset is overvalued or undervalued the current market cap through dividing the market value (MV) by the realized value (RV). If the MVRV is between 0 and 1, then the market is undervalued on average.
Just 4 days prior to halving, data from Santiment showed that BTC’s MVRV ratio was standing at 0.99. What about today? Bitcoin’s MVRV ratio is greater than 1, despite its downward trend after halving, indicating slightly overbrought and overestimated.
Another indicator also reveals that the Bitcoin market is now overestimated. The NVT signal refers to the Network Value by the total transactions volume in USD over the past 24 hours. For traders considering a short-term purchase, the model suggests that there’s an opportunity for a quick profit based on the realized price and the 200-week average.
Currently, NVTS is in a downward trend.
So, what do you think? Share your thoughts on BTC price in the post-halving period with us!
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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