GM. Today’s headlines:
- Bitcoin price attempts a break of the 200-day moving average for the 5th day in a row.
- VP Harris says she'll encourage crypto business while protecting consumers.
- SEC approves Options trading for BlackRock Bitcoin ETF.
Bitcoin price has continued to move higher over the past week. It is now up +6.64%.
Figure 1: Bitcoin past week price performance.
Over the past year Bitcoin’s price is up a staggering +142%. That is significantly higher than other investment class choices. Including:
- S&P500: 32%
- Dow Jones Index: 24%
- Apple: 31%
- Tesla: -1%
Figure 2: Bitcoin's 12-month performance versus key investment alternatives.
Despite the sideways price action for the past 6 months, Bitcoin remains significantly higher than many traditional asset classes as highlighted by the chart above.
News You Need to Know
- VP Harris says she'll encourage crypto business while protecting consumers.
- SEC approves Options trading for BlackRock Bitcoin ETF.
- Scaramucci believes Bitcoin will hit $100,000 by year end.
- Coinbase will be bringing wrapped Bitcoin to Solana.
The Big Story
Bitcoin Rallies to 200-Day Moving Average After Fed Rates Cut
On Wednesday last week, the Federal Reserve announced a 50 basis point rate cut. That marks the first cut in rates since March 2020, when markets panicked due to Covid.
Figure 3: The Fed cut rates by 50 basis points last week.
This can be seen as bullish for assets like Bitcoin as investors seek higher returns in ‘risk assets’ rather than holding money in traditional interest-bearing assets or savings.
Last week’s newsletter mentioned that a deeper cut than the expected 25 basis points would likely result in a rally in the price of Bitcoin and other risk assets. That is precisely what we have seen, with Bitcoin’s price rallying up around 10% since the announcement.
However, in recent days $BTC price has been ranging as it has struggled to break back above its 200-day moving average. Any past five-day attempts to break above have been pushed back down.
Figure 4: Bitcoin attempting to break above the 200-day moving average again today.
Should it break above, it will then be back into the post-ETF announcement price range of Q2 this year between $64,000 - $74,000. This would bring back even more bullish enthusiasm to the market.
Key Chart
Each week, our BM Pro Analysts hand-pick a must-see chart for you. This week:
MVRV Z-Score
Figure 6: MVRV Z-Score
What it is:
- Definition: The Bitcoin MVRV Z-Score is a market indicator that measures the ratio of the difference between Bitcoin’s market value (Market Cap) and realized value (the total purchase price of all bitcoins).
- Components: It combines market value (how much all bitcoins are worth together) and realized value (the price at which each bitcoin last moved), providing a more nuanced picture of where the current price stands in relation to the average cost basis of bitcoins purchased.
- It then uses a statistical tool called a Z-Score to pull apart extremes in the data to highlight periods of extreme over or undervaluation for Bitcoin.
Why this matters:
- Throughout Bitcoin's history, the MVRV Z-Score has identified cycle tops (significantly overvalued) and bottoms (extremely undervalued).
- Tops occur when the market value is much higher than realized value (average cost basis). Bottoms occur when market value of Bitcoin drops below realized value (the average cost basis).
- It helps investors to make informed decisions by understanding where Bitcoin might be in its market cycle, aiding in long-term investment strategies and timing.
What’s Happening Now:
- Current Market Position: A score of +1.76 indicates that Bitcoin is transitioning from an undervalued (accumulation) state. It remains a long way from bubble territory.
- Previous cycles have topped out only when MVRV Z-Score has exceeded a score of +6.
MVRV Z-Score is a critical on-chain metric for long term Bitcoin investors, helping them to identify the extremes of Bitcoin’s market cycles.
You can track this metric for free here.
The Bitcoin Magazine Pro Team.