Assesment Market Cycle as of February 2025
Observations:
- Long-term holders have started to take profits since November, with 1+ Year HODL Wave from 68% to 62% (however the top is reached way after this started to happen)
- The long-term holder profit/loss ratio is still very high, suggesting motivation to take profit could still be high
- Long Term Holder’s unrealized profit share has steadily declined since November, now at its lowest since September.
- At the same time, LTH inflow volumes to exchanges have declined from $526.9M in December to $92.3M, a -83% decline. Implying less selling pressure. Overall exchange deposit volumes declined from $6.1B to $2.8B (-54%).
- Realized profits peaked at $4.5B in Dec 2024, now down to $316.7M (-93%).
- Long-Term Holders (LTH) show signs of returning to accumulation
- 50.2% is the proportion of wealth held by new BTC investors (24h to 3 months), increasing but still well below the levels seen during previous ATH cycle tops
- However, currently lower retail activity after December meltup, retail investors were spending $20.6M per hour. Currently, that figure has dropped to ~ 10.7M per hour - a ~48% decline.
- Funding rates for the top assets in the market show the appetite for long positions has not returned to the levels seen in the November to early December rally. This indicates a lack of aggressive demand currently.
- Short-Term Holder Realized Price currently is ~91k. This could be an important level to hold since this cohort could panic sell when in significant losses. Still losses are not huge.
- Bitcoin MVRV Z - Score, one of the most commonly used to assess overvaluation, is still below the previous tops
Assessment:
Long-term holders still have substantial profits and have been net sellers since the end of last year, but selling pressure has started to ease recently.
Meanwhile, short-term holders remain the dominant source of demand in the market, with long-term holders showing signs of reaccumulation but not at high levels yet.
In my view, this makes the market more vulnerable to industry-related or macroeconomic shocks, unexpected events like those seen since last December. Seasoned investors are currently more inclined to take profits, while short-term demand is more speculative and sensitive to price fluctuations.
Given the current slowdown in speculative retail activity, lower funding rates compared to their December peak, and reduced selling pressure from long-term holders at this level, a temporary equilibrium may have been formed at ~90-100k, if macroeconomic conditions indeed stabilize.
Overall it seems the market is in a mid/late stage, where very overheated levels of past cycles have not been reached. So, in theory, based on past patterns, the bull market still has a way to, especially combined with a better regulatory environment, especially in the US.
Things to watch carefully currently:
- Monitor volatility and macro shocks closely, breakouts in either direction often follow tight consolidation ranges, and macro leads could be the catalyst in the current environment
- Renewed sell-side activity, since a resurgence in LTH selling could signal more distribution ahead