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3 charts that show how the cryptocurrency bull market has just begun
Finally, after two long years, things are picking up in the world of cryptocurrencies. Year-to-date, the total cryptocurrency market has grown 35%, just 20% shy of surpassing the all-time high of $2.8 trillion seen at the end of 2021.
With such a significant leap, it is reasonable to fear that cryptocurrencies’ momentum could falter, making an investment today too risky. However, looking at the data, it appears that the cryptocurrency bull market has not yet reached a local peak.
In other words, while some of the gains may be behind us, there is still a lot of potential in the cryptocurrency market. Let’s take a look at three charts that show how cryptocurrencies’ best days remain ahead.
Breaking down Bitcoin
Since it makes up about half of the value in cryptocurrency, worth evaluating BitcoinThe current position of (CRYPTO:BTC) can provide context on the overall market position. This is a graph of Bitcoin’s market value versus realized value, better known as MVRV. Developed by analysts David Puell and Murad Muhmudov, MVRV divides Bitcoin’s market value by its realized value.
Image source: TradingView.
Data from TradingView
The market value is calculated by multiplying the circulating supply of Bitcoin by its current price. It is equal to the market capitalization. On the other hand, realized value is calculated by determining the price of each Bitcoin the last time it was involved in a transaction. This can provide a more granular view of market dynamics, as it eliminates the generalization that every Bitcoin in circulation was purchased at the most recent price.
By dividing the two, we get the MVRV value and a better view of Bitcoin’s current position. In fact, MVRV has historically proven to be an early indicator of when the cryptocurrency market as a whole has peaked or bottomed. With its current value at just 2.3, Bitcoin is far from levels around 3.5 when bull markets tend to start to lose momentum.
Coinbase Trading Volume Analysis
As one of the most popular crypto platforms in the world, we can extrapolate trading data from Global Coinbase (NASDAQ: COIN) to better understand the situation in the cryptocurrency industry. Similar to Bitcoin’s MVRV, the trading volume on Coinbase shows that there is still room for the cryptocurrency market to grow.
Based on the chart, it is evident that investors are yet to return to cryptocurrencies. We can see that during the last bull market of 2021, the trading volume on the platform exceeded more than $548 billion in the fourth quarter alone. According to the latest earnings report, total trading volume stands at just $154 billion, levels last seen when cryptocurrencies were in the midst of a brutal crisis. crypto winter.
The story continues
Data source: The Motley Fool.
Until these numbers approach those of the last bull market, there is little reason to believe that the recent surge in cryptocurrencies is just scratching the surface. Again, since cryptocurrencies have historically reached new all-time highs with each bull market cycle, don’t be surprised if the total volume in this cycle surpasses previous records.
Checking in on DeFi
Still in its early stages, decentralized finance (DeFi) it is one of the most important use cases of cryptocurrencies and blockchain technology. Comprised of non-fungible tokens (NFTs), stablecoins, lending protocols, and more, the DeFi economy is full of innovative applications that push the boundaries of finance.
There are several blockchains that make up DeFi. Like today, Ethereum (CRYPTO:ETH) dominates the space, but dozens of others are vying for market share.
With so many blockchains contributing to the DeFi economy, tracking their value can be a significant indicator in gauging the progress and standing of the cryptocurrency market. Currently in an uptrend due to the recent recovery, the collective value of DeFi currencies is around $85 billion today.
Image source: TradingView
Data from TradingView
However, this value is still significantly far from its all-time high reached during the last bull run that peaked in November 2021. At the time, DeFi accumulated a massive value of over $175 billion.
Similar to trading volumes, it is safe to assume that due to the growing potential of DeFi, it is expected to surpass previous records. If this turns out to be true, then there is a lot of catching up to do before we can even begin to consider that the cryptocurrency bull market has peaked.
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RJ Fulton has positions in Bitcoin, Coinbase Global and Ethereum. The Motley Fool has positions and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
3 charts that show how the cryptocurrency bull market has just begun was originally published by The Motley Fool