Bull Market Vibes: Bitcoin at $100k

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This week we take a temperature check of the market as Bitcoin passes $100k. We take a look at the price action on altcoins and gauge how hot the market is currently. Finally, we look at indicators that can help determine when the market is excessively overheating and likely ready for a retrace.

Network Fees— Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

• Bitcoin fee changes have remained flat at around $10M. However, this could change in the coming week with the new price discovery above $100k
• Ethereum saw nearly a 40% increase in fees as DeFi and memecoin trading continue to surge

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

• Large BTC inflows could signal some users will be taking profit with BTC passing $100k
• ETH continues a second week of outflows, suggesting that users are eyeing a price jump given bullish sentiment across the market

Bitcoin Passes $100K

A huge milestone was achieved this week as BTC reached new all-time highs and finally passed over the $100k mark. With Bitcoin’s market cap also surpassing $2 trillion in size, there is growing speculation on the possibility of Bitcoin eventually surpassing gold as the asset with the largest market cap.

ITB Crypto Dominance PerspectiveEven with the $100k achievement for Bitcoin, the tides are rising across crypto in general. Many altcoins in the top 300 by market cap have seen large gains in the last week. This means that BTC’s dominance in the market has actually decreased, which could be the initial signals of a larger altcoin run.

Bull Market Vibes in Full Swing

Since the U.S. election, bullish sentiment has been seen through the crypto markets. With BTC passing 100k, the fervor of the bull market is beginning to disseminate through the entire ecosystem. In the last week alone, the entire crypto market cap rose by over $300B. This means that any good news can potentially make tokens double in price and other tokens begin to rise in price along with the market leaders.

• Reserve’s RSR token sees over 100% gain after former advisor to the protocol, Paul Atkins, was announced to be Donald Trump’s pick for the SEC
• “Dinocoins” (altcoins launched in previous cycles) have been seeing large prices gains in the last week
• Over $250 billion has been added to crypto markets in the last week

ITB AnalyticsDinocoins and Alt L1 Tokens Shine — In the last month, and particularly the last week, we have seen many altcoins have tremendous price gains.

• DOGE has increased over 300% in price driven by news of the upcoming Department of Government Efficiency (DoGE) in the U.S. government, led by Elon Musk.
• Multiple Alternative Layer 1 blockchain tokens such as LTC, AVAX, ALGO, ADA, and TRX have seen over 100% price increases in the last month.

ITB Layer 1 Comparison Perspective### Bull Market ⇒ More Risks

As more and more tokens have charts that appear to be up only, crypto users often begin to take larger risks to try and capture a bigger share of the pie before the music stops. Apart from the price action of the tokens highlighted above, there are other signals showing that the market could be starting to overheat.

Fear and Greed Index Heating up

• The crypto fear and greed index has been hovering above 80 for the last couple weeks. Already we have seen a couple days over 90.
• Historically, market retraces occur when the index is regularly above 90

alternative.meOther Indicators to Watch in Overheating Market

There are many indicators to that can help gauge when a market is too hot and likely to have a retrace. Below are a few indicators that consider both risk and price action.

• Bitcoin Market Value to Realized Value (MVRV) nears levels that have corresponded with large price drops in the past. The chart below shows that the current MVRV level is higher than the levels seen in the retrace earlier this year and the end of the bull market in the last cycle
• Health Factors and High Risk Loans in lending markets can identify increases in over leveraging. High risk loans can often be a leading indicator of potential increased price volatility as liquidations can push prices downwards. Watching leading DeFi Lending protocols such as Aave markets can provide a good heuristic of over all market health.

ITB Bitcoin Cycles PerspectiveCrypto markets can maintain bullish sentiment for extended periods of time, so a retrace might not happen right away, but it is worth monitoring as the excitement continues to grow. Extended periods of time with the Fear and Greed index above 90 or the MVRV above a 300% ratio will likely be strong indicators for users to hedge themselves against an upcoming price drop.

Please note, this newsletter is intended for informational purposes only and should not be considered financial advice

Bull Market Vibes: Bitcoin at $100k was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.