Bitcoin Has Yet to Enter the Realm of a True Bull Market

Bitcoin is currently at a turning point, where questions about its true state and impact on the financial system are increasingly being raised. Despite growing optimistic signals and indicators, bitcoin has yet to fully enter the proper phase of a bull market.

The bull market has not yet begun

According to the blockchain analytics firm IntoTheBlock, bitcoin has experienced its sixth consecutive week of inflows into centralized exchanges. Nearly two billion dollars in net deposits have been recorded since December. This trend is typically interpreted as a signal of increased bitcoin selling activity.

Delving deeper, it appears that ownership of bitcoin is changing. Indeed, the average holding time of bitcoins has recently reached a record value. This trend suggests that long-term holders are beginning to move their assets, reducing the amount of bitcoin they own.

Interestingly, addresses holding more than a thousand bitcoins have increased their balances, while those with less than a thousand bitcoins have reduced their holdings in January. On the other hand, the balance held by short-term owners has been increasing since October 2023, a trend typically associated with a bull market.

However, the current market scenario does not reflect the typical characteristics of previous peaks, according to IntoTheBlock.

– The lack of volume compared to previous bull markets, limited reduction in the balances of long-term holders, and a very modest MVRV ratio of 1.88 imply that bitcoin is most likely experiencing a temporary failure and has yet to enter the true bull market area – wrote the analysts at IntoTheBlock.

MVRV is the ratio of market capitalization to realized capitalization that indicates whether the price is overvalued or not. Historically, values above 3.7 have marked price peaks, while values below 1 have indicated bottoms.

Realized capitalization is a variation of market capitalization that values each UTXO based on the price at which it was last moved, as opposed to its current value. As such, it represents the realized value of all bitcoins, as opposed to their market value.

UTXO is a technical term for the amount of digital currency that remains after a cryptocurrency transaction. It can be thought of as change after purchasing an item.

Juan Pellicer, a senior researcher at IntoTheBlock, emphasized caution in interpreting these trends. He noted that bitcoin has not experienced a significant drop in six months.

Such a trend may mean that the recent downward movement could be a natural market correction.

– Until we see things like consistent asset distribution from long-term holders to short-term holders, MVRV ratios above 2.5, and a significant increase in transactions and volume, it is premature to call the end of the bull market – said Pellicer.

The event that typically marks the beginning of a ‘true’ bull market has been halving the last three times in bitcoin’s history. The next one is expected in April.

‘This time is different’ was the most dangerous phrase that bitcoin skeptics could utter after each halving, thinking that the classic four-year cycle would not unfold as it did previously. It is highly likely that history will repeat itself and that bitcoin will enter a true bull market after the halving, recording a new peak by the end of 2025.