Bitcoin and the broader cryptocurrency market exhibit distinct cyclical patterns, often characterized by multi-year phases of appreciation and consolidation. While past performance is not a guarantee of future results, analyzing on-chain metrics and market data can provide valuable insights for investors navigating these volatile periods. This cycle appears to be maturing differently, supported by new financial products and evolving regulatory landscapes, yet many classic indicators suggest there is significant room for growth.
Understanding Cryptocurrency Market Cycles
Historical data reveals that Bitcoin's price does not move randomly. Instead, it demonstrates statistical momentum—periods of upward movement tend to be followed by further gains, and downturns often persist. Over the long term, these cyclical fluctuations occur around a rising historical trend.
Previous cycles have been driven by varying factors, and future returns may not mirror the past. As Bitcoin matures, gains wider adoption among traditional investors, and the supply impact of its quadrennial "halving" events diminishes, its cyclical nature may even transform. Nevertheless, studying past cycles helps investors understand its typical statistical behavior and informs risk management strategies.
Measuring Momentum in the Current Cycle
Analyzing Bitcoin’s performance during the rising phases of previous cycles provides useful context. When each cycle low is indexed to 100, we can trace the price increase to its subsequent peak.
Early cycles were short and intense. The first lasted less than a year, and the second lasted roughly two years—each surged over 500 times from their cycle lows. The next two cycles each lasted nearly three years. From January 2015 to December 2017, Bitcoin’s value increased over 100-fold. From December 2018 to November 2021, it rose approximately 20 times.
The current cycle began in November 2022, when Bitcoin’s price bottomed near $16,000. It has now been running for over two years. So far, the price appreciation in this cycle has closely tracked the trajectory of the previous two cycles—each of which required roughly another year to reach their price peaks. In terms of magnitude, the current cycle’s approximately 6x gain is substantial but still well below the gains seen in the past four cycles. This suggests that, both in duration and magnitude, there may be room for this bull market to extend further.
Key On-Chain Indicators to Monitor
Beyond analyzing historical price patterns, investors can use a variety of blockchain-based metrics to gauge the progress of a Bitcoin bull market. These include measures of how much the asset has appreciated above its cost basis, the scale of new capital inflows, and price levels relative to miner revenue.
MVRV Ratio
A popular metric is the Market Value to Realized Value (MVRV) ratio. This measures Bitcoin’s market capitalization (the value of each coin at secondary market prices) relative to its realized capitalization (the value of each coin based on the price at its last on-chain movement). Effectively, it shows how far the market value exceeds the total acquisition cost.
In past cycles, this ratio reached at least 4 near market tops. The current MVRV ratio is approximately 2.6, indicating that the market may still be in a mid-cycle phase. That said, peak ratios have been declining each cycle, and it is possible the price could peak before the ratio reaches 4 again.
HODL Waves and Supply Activity
Other on-chain indicators assess the degree of new capital entering the Bitcoin ecosystem—a phenomenon often referred to as "HODL Waves." Price appreciation often occurs when new buyers acquire coins from long-term holders at higher prices.
One useful metric is the proportion of the total circulating supply that has moved on-chain in the past year. In previous cycles, this indicator reached at least 60% during the appreciation phase, meaning that over 60% of the supply changed hands within a year. It currently stands around 54%, suggesting that we may see further increases in on-chain activity before the market peaks.
Miner Metrics
Indicators focusing on Bitcoin miners—the professionals who maintain the network—can also provide signals. One common measure is the Miner Market Capitalization to Thermal Cap (MCTC) ratio. This compares the dollar value of coins held by miners to the cumulative value of the Bitcoin they have earned through block rewards and transaction fees.
The idea is that when miner assets reach a certain threshold, they may be more inclined to sell and take profits. Historically, prices often peaked after this ratio exceeded 10. It currently sits near 6, again pointing to a mid-cycle phase. Like the MVRV ratio, however, peaks in this metric have been declining cycle-over-cycle.
It is important to note that on-chain metrics can vary across data providers. These tools offer only a rough comparison between the current cycle and previous ones and cannot guarantee a fixed relationship with future price returns. Taken together, however, common Bitcoin cycle indicators remain below levels seen at past price peaks. If fundamental supports remain strong, the current bull market could very well continue.
Signals from Beyond Bitcoin
The cryptocurrency market extends far beyond Bitcoin, and signals from other areas of the industry can also help gauge the market cycle. Given the relative performance between Bitcoin and other crypto assets, these indicators may be particularly relevant over the next year.
In the last two market cycles, Bitcoin’s dominance—its share of total crypto market capitalization—peaked around the two-year mark of the bull market. Recently, its dominance has declined, coinciding with the two-year point in the current cycle. If this pattern continues, investors should incorporate a broader set of indicators to assess whether crypto valuations are approaching a cycle high.
Altcoin Funding Rates
For example, investors can monitor funding rates for perpetual futures contracts. These are periodic payments between long and short traders to keep the contract price aligned with the spot price. When leveraged demand from speculative traders is high, funding rates rise. Therefore, the level of funding rates across the market can serve as a gauge of overall speculative long positioning.
The weighted average funding rate for the top ten cryptocurrencies excluding Bitcoin—often called "altcoins"—is currently significantly positive. This indicates strong demand from leveraged investors, though it dipped sharply during recent market volatility. Even at local highs, it remains below levels seen earlier this year and during the previous cycle’s peak. This suggests a market characterized by moderate speculative long positioning, potentially still far from a cycle top.
Altcoin Open Interest
In contrast, the open interest (OI)—the total value of outstanding perpetual futures contracts—for altcoins recently reached elevated levels. Prior to a wave of liquidations in early December, the aggregate altcoin OI across three major perpetual futures exchanges was nearly $54 billion. This highlights a significantly high level of speculative long positioning. Although OI dropped by approximately $10 billion after the liquidations, it remains at a high level. Elevated speculative positioning is consistent with later-cycle behavior, making this a critical metric to watch closely.
The Case for a Continued Bull Run
Since Bitcoin’s creation in 2009, the digital asset market has evolved dramatically. This bull run is different from previous ones in several crucial aspects. Most importantly, the approval of spot Bitcoin and Ethereum Exchange-Traded Products (ETPs) in the United States has facilitated over $36.7 billion in net inflows, integrating these assets into traditional investment portfolios. Furthermore, recent U.S. elections may lead to greater regulatory clarity, strengthening the standing of digital assets in the world's largest economy.
These profound changes suggest that the valuation of Bitcoin and other crypto assets may not strictly repeat the early four-year cycle patterns. The asset class may eventually break free from its historically defined cycles.
At the same time, cryptocurrencies like Bitcoin behave as digital commodities, and their prices can exhibit momentum characteristics. Therefore, analyzing on-chain metrics and altcoin positioning data remains a valuable tool for investor risk management.
Current indicators suggest the market is in a mid-cycle phase. Metrics like the MVRV ratio are well above cycle lows but still short of previous market top levels. 👉 Explore more market analysis strategies to deepen your understanding. As long as fundamental supports remain strong—including growing adoption and a favorable macro environment—there is no reason the crypto bull market cannot extend well into 2025 and beyond.
Frequently Asked Questions
What is the MVRV ratio and why is it important?
The MVRV ratio compares Bitcoin's market value to its realized value, indicating whether the asset is trading above or below its average acquisition cost. It is important because historically, extremely high readings have often coincided with market tops, helping investors gauge potential overvaluation.
How do funding rates indicate market sentiment?
Funding rates are payments made between traders in perpetual futures contracts. High positive rates indicate strong demand from leveraged longs, suggesting bullish sentiment. Conversely, extremely high rates can signal excessive leverage and potential for a market correction.
Could this cycle be different from previous ones?
Yes. The introduction of spot ETFs has opened the door to massive institutional capital, and potential regulatory clarity could fundamentally change the investment landscape. These factors may alter the classic four-year cycle pattern, leading to a longer or more mature bull market.
What are the main risks to the current bull market?
Key risks include a deterioration in macroeconomic conditions, regulatory setbacks, or a sharp decline in on-chain activity and user adoption. A significant drop in liquidity or a black swan event could also disrupt the positive momentum.
How can investors use these indicators in practice?
Investors can use these metrics as tools for risk management rather than timing the market. For example, consistently elevated readings across multiple indicators might suggest taking a more cautious approach, while mid-cycle readings could support a strategic long-term holding strategy.
Why is Bitcoin’s dominance declining?
A decline in Bitcoin's market dominance often occurs when capital rotates into altcoins later in a cycle. Investors seeking higher returns may move funds into smaller-cap assets, which can be a sign of increasing speculative activity across the broader crypto market.