Key Takeaways
What is the importance of the low monthly volatility?
The 2-year low in monthly volatility, followed by the expansion to ATHs over the past week, signaled that a strong bullish move is likely ahead.
What combination of metrics should investors watch out for?
A rising MVRV and increased inflow of BTC to exchanges would be a strong distribution risk, but conditions were the opposite of that right now.
Investors were willing to bet more, not just on stocks and crypto, but also on gold and silver.
The past six months have seen stellar market performance, likely due to the weakening U.S. Dollar. Bitcoin [BTC] made a new high at $126.2k on the 6th of October.
Exchange reserves of BTC were at a six-year low, showing robust accumulation and a shrinking market supply.
The government shutdown has raised macroeconomic uncertainty, but this has the potential to benefit equities and crypto. S
peaking to AMBCrypto, Co-founder and CEO of South African crypto exchange VALR, Farzam Ehsani said,
“The ongoing U.S government shutdown has amplified Bitcoin’s safe haven narrative, with investors increasingly rotating from U.S.-related assets like treasuries into assets seen as resilient to political dysfunction and inflationary pressure. The dollar’s continued weakness further amplifies the appeal of BTC as a hedge.”
Source: Bitbo
The “Uptober” expectation has a good chance of coming true yet again. The Bitcoin volatility index (30-day) against the USD reached the lowest value since July 2023.
A strong breakout generally follows low volatility periods.
Combined with a weak dollar, Q4 could be extremely bullish.
What typically happens when Bitcoin sets a new ATH
Source: CryptoQuant
In a post on CryptoQuant Insights, XWIN Research Japan laid out the typical pattern that accompanies a BTC move to all-time highs.
Exchange reserves tend to fall before and during the time BTC pushes to all-time highs, denoting coins being moved to cold storage.
In November 2021, as BTC was nearing the cycle top, exchange reserves were rising. By contrast, reserves were falling over the past year. Hence, there was little risk of distribution based on this metric.
Source: CryptoQuant
The MVRV ratio was another important clue for investors. It shows how profitable investors are. Extreme values prompt market-wide selling that tends to mark the top of a bull run.
In late 2021, the MVRV was overheated and was followed by selling. Over the past year, the MVRV’s rise has been more controlled.
Hence, overheated MVRV conditions combined with rising exchange reserves underline distribution risk. This is something investors should watch out for later in the cycle.
Right now, moderate MVRV values combined with falling exchange reserves pointed to accumulation and room for further gains.
