Market Insight #11 — Closer to the Bottom Than the Top
Hello everyone and welcome to this week’s market insight.
Portfolio Update
No update. Still 100% in cash.
Market Update
It is becoming a bit repetitive, but nothing has changed over the past few weeks. Bitcoin is finally showing a bit of strength and is trading around $73k at the time of writing. That is broadly in line with the short-term bounce I have been expecting.
However, my broader view remains the same. I do not expect Bitcoin to sustain a move above $80k, and I still believe the market is likely to revisit lower levels before the next durable uptrend begins.
As per the previous updates, the framework remains unchanged:
• Below $55k, I begin scaling in.
• Above $55k, patience.
Education of the Week — Bitcoin Is Closer to the Bottom Than the Top
Most on-chain indicators suggest Bitcoin is now closer to the bottom of the cycle than the top. That does not mean we are in deep value yet, but it does mean the market is no longer overheated. One useful metric for understanding this is the MVRV ratio, which compares Bitcoin’s market value to its realized value (the average price at which all coins last moved).
Today, MVRV is around 1.2, which historically sits in what could be considered a fair value zone. Bitcoin is no longer expensive, but it has not yet reached what previous cycles would classify as deep value.
Historically, forward returns have tended to improve as MVRV falls:
MVRV | 1Y Avg Return | 2Y Avg Return | 3Y Avg Return |
|---|---|---|---|
1.2 | 11% | 62% | 308% |
1 | 19% | 185% | 889% |
0.8 | 103% | 353% | 2738% |
This tells us two things.
First, Bitcoin at these levels has historically produced positive long-term returns.
Second, the best opportunities have usually appeared when valuations fall deeper into the cycle, particularly below MVRV = 1.
For context, Bitcoin spent meaningful time below that level in previous bear markets:
2018: 42 days below MVRV = 1
2022: 167 days below MVRV = 1
Current cycle: we have not reached that level yet
That is why I remain patient. Bitcoin may already be closer to the bottom than the top, but the deepest value has historically appeared slightly later in the cycle. In practical terms, an MVRV of around 1.2 corresponds roughly to $66k, an MVRV of 1.0 to about $55k, and an MVRV of 0.8 to roughly $44k. These levels align closely with the price ranges I have been discussing over the past few weeks. That aligns closely with the levels I have been discussing over the past few weeks.
This is why my strategy remains unchanged: wait for deeper value before deploying capital. If those levels arrive, I will begin scaling in.
The plan stays the same.
Trilux
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