Summary 2024 has been monumental for Bitcoin, with spot Bitcoin ETFs approved by the SEC, driving significant capital inflows and a six-figure price. Capital flows into Bitcoin investment products have surged, with $4.7 billion in December alone, highlighting Bitcoin's dominance in digital asset investments. Cycle indicators suggest Bitcoin's price may not have peaked yet, but technicals show bearish divergences and potential risks, urging caution. Despite fundamental concerns, I believe the current dip below $100k is a buyable opportunity, with potential for new highs in 2025. 2024 has been a truly terrific year for Bitcoin ( BTC-USD ) and Bitcoin proxies like the Grayscale Bitcoin Trust ETF ( GBTC ). Of particular importance was that three-letter addition to GBTC's fund name back in January. The approval of spot Bitcoin ETFs by a kicking and screaming US Securities and Exchange Commission truly opened the floodgates of liquidity. Recently Bitcoin officially hit a six-figure price as many of us expected . Where do we go from here? Data by YCharts In this article, we'll look at updated capital flow numbers, cycle indicators, and basic technicals to assess what (if any) upside remains in this monstrous Bitcoin 131% year to date rally. Capital Flows Q4 has been an absolute monster for capital flows in Bitcoin and other digital assets. Coinshares now has the month to date net flow into Bitcoin investment products at just under $4.7 billion through December 14th. Per data from The Block, we can see at least an additional $1.7 billion has come into US-listed spot Bitcoin ETFs between December 16-18th. Daily Spot BTC ETF Flows (The Block) These are enormous numbers. Especially when considering GBTC outflow really hasn't stopped this month. To be sure, the outflow from GBTC has slowed down dramatically since May, but even with the lower-priced option of the Grayscale Bitcoin Mini Trust ETF ( BTC ), Grayscale's original ETF continues to see outflow: BTC Supply Through Grayscale ETFs (The Block) Grayscale's spot Bitcoin products held 250.18k BTC on November 30th. As of December 19th, that figure was down to 249.6 BTC. Bitcoin presses on. Not only does capital keep flowing into Bitcoin and other digital assets, but Bitcoin's share of that net flow continues to be enormous. As of December 14th, Bitcoin's $38.6 billion share of $44.5 billion in YTD digital asset net flow is a staggering 87%. It seems clear to me that in the eyes of Wall Street and the larger investment community, Bitcoin is still very much the favorite. Cycle Indicators In this section, it is important to remember that these are not forecasts or price targets. They are just indicators that we can use to determine if the price of Bitcoin is getting extended based on historical averages and multiples. I like to use some of them, but I also think it’s important to be selective because these tools can provide very different signals. We’ll go through a few of the ones that I personally like. First, the MVRV, or market value to realized value: Bitcoin MVRV (BGeometrics) This shows the premium in market price over the average price paid per coin by holders. Bitcoin's market value to realized value is presently 255% - which implies the average holder has a 155% gain on their cost basis. What's also important to point out is the Z-score, or deviation, of the MVRV from statistical norms. At at Z-score of 3.2, Bitcoin's MVRV isn't quite as extended as it could be, but it is important to keep in mind that each peak in BTC price has resulted in a lower high in MVRV through the years. Something else to consider is 97.6% of BTC holders are currently in profit: Bitcoin Holders in Profit (IntoTheBlock) Percentage of holders in profit in the high 90's is generally always something that leads peaks in price, even when short term. If Bitcoin is a game, there are brief periods where everyone is a winner. This is obviously not reality and always corrects. As is generally the case when Bitcoin moves to the magnitude that it has this year, HODLer balance has been in decline for most of the year. HODLers are defined as wallet addresses that haven't moved supply in 12 months. HODLer Balance (IntoTheBlock) In January the HODLer balance was 13.8 million BTC. That figure is currently 12.3 million BTC. HODLer balance is down roughly 11% from the peak earlier this year. This is very typical. HODLer balance declined by 14% between 2020 and 2021 and by 23% between 2017 and 2018. It's certainly possible the decline will be less extreme between 2024 and 2025. But until we see that HODLer balance start to move back up, I don't think we've seen the high in Bitcoin's price just yet. Historically, HODLers don't start reallocating until after the price has topped out. Finally, I want to share Checkmate's 'Euphoria Zone' chart: Euphoria Zone Chart (Checkonchain) This is a pricing model that utilizes several different indicators to identify when the market is in the "euphoria zone." As one would expect, when the market is euphoric it's typically a good time to start thinking about exiting trades. Bitcoin entered the euphoria zone in November. The only question remaining is how long euphoria can last. Bitcoin spent most of 2017 in euphoria and about 7 straight months in euphoria between November 2020 and May 2021. It's important to remember that none of this means anything will happen again in the same way that it has in the past. We are simply using these models as tools to make our own assessments on where price may go. Technicals are also important. Technical Opinion From a technical standpoint, I like to keep my analysis mainly to daily and weekly charts. I have some concerns about what I'm seeing on the daily: TrendSpider Here we find numerous bearish divergences in the RSI going back to mid-November. There was a divergent high on November 21st, December 5th, and another on December 16th. This was a clear warning sign. The good news is Bitcoin has not given up the 50 day moving average and has actually responded very well from a short-lived test of that MA. TrendSpider The weekly chart shows a perfect back-test of the 8 week. However, there are several concerns here as well. First, unless Bitcoin pulls off a drastic recovery over the next several days, the current weekly candle is highly bearish in my view. It's engulfing to the downside and it comes with an RSI that is falling out of overbought. My view has generally been that the 8 and 20 week MAs will tell the tale. Until we see a weekly close below the 8 week, I think dips are still buys for now. Risks I've been writing about Bitcoin on this website since 2019. Despite literally hundreds of articles covering BTC and crypto-related assets, it's still difficult for me to say that any price for Bitcoin is justifiable based on fundamental usage or utility. For instance, monthly active addresses hit their lowest level since 2016 in October 2024. Bitcoin Monthly Fees vs DAAs (Token Terminal) Despite sporadic surges, network fees make up a very small portion of miner incentive - which remains a long term issue for a fixed-supply asset. L2 solutions like Lightning Network have generally failed to scale the network. I see serious issues. Bitcoin is not perfect and is still very much an idea, in my view. But I've generally remained bullish because people keep buying it anyway. Is that a great reason to buy something? Probably not. But that hasn't mattered yet. Number go up. Final Takeaways In my opinion, this fall back under $100k per coin has been a necessary pullback and it's one that I think offers a buyable dip. I expect Bitcoin bulls are going to enjoy yet another pump to new highs in 2025 before this thing tops out for the cycle. I'm not going to attempt to guess what that top price will be, but I think it's going to be many years before Bitcoin sees a seven-figure coin price - if it happens at all. In my view, the ease with which investors can now allocate to Bitcoin can absolutely be a double edged sword. These ETFs are powering Bitcoin higher very quickly because investors are bullish. Downside speed is likely to be evident as well when sentiment turns bearish. Again, I don't think we've seen the top yet for this cycle based on both sentiment and many of the indicators I've provided. But that is just my opinion. I do think it would be wise for Bitcoiners to, at minimum, entertain the possibility that we have already seen the top for this cycle. The market's response to the latest FOMC has not been a good one and Bitcoin has been highly correlated to risk assets like the Qs. My approach to Bitcoin and its proxies has always been to take small chunks off when the market is ripping hard. I have personally lightened up since the coin hit $100k. But that is not stopping me from buying this dip below $93k with swing capital. Be careful out there. Don't forget to take profit. I hope everyone enjoys the holidays and has a happy new year. See you again in 2025.
