New Bitcoin Market Cycle Model: Bear Market Over

Introduction

In this section, the speaker introduces a new chart about Bitcoin Market stages and explains how it is different from the stock to flow model.

Bitcoin Market Stages Chart

• The Bitcoin Market Stages chart is the speaker's favorite chart after stock to flow because it is simple, intuitive, and useful.

• The chart is based on an on-chain variable and a simple if-then rule that detects the stage or phase of the market. It does not predict or value anything.

• The market moves in cycles of bull markets and bear markets, which are influenced by psychology such as FOMO, greed, fear, and capitulation. Knowing which stage you are in can help manage emotions and make better decisions.

• There are four stages: early bull market, late bull market, early bear market, and late bear market. We are currently in an early bull market as we start a new cycle.

Stock to Flow Model

• The stock to flow model measures scarcity based on the 21 million supply cap of Bitcoin and its halvings every four years (2012, 2016, 2020). It predicts how much market value can be expected to increase with those halvings.

• The model was published in 2019 with a formula that gives the Bitcoin price based on the stock to flow ratio entered into it. It does not change much between halvings except for some wobbling due to block times variability.

• Auto-correlation or serial correlation was discussed regarding error dots representing when Bitcoin price is above or below model value (1 = exactly on model value). Once price goes above model value there seems to be no correlation between the two.

Bitcoin Halving and Stock-to-Flow Model

In this section, the speaker discusses the relationship between Bitcoin halvings and the stock-to-flow model.

Bitcoin Halving and Stock-to-Flow Model

• The stock-to-flow model is based on scarcity, which doubles every halving.

• The original model predicted a value of 100K based on yearly data.

• A cross-asset model based on gold and silver estimated a value of around 288k.

• The current stock-to-flow model predicts a value of 55k for Bitcoin at the moment.

• Scarcity will double every halving, which will impact price.

• Bitcoin's scarcity will be two times that of gold, so its market cap should be greater than gold's.

• Before each halving, the price reverts to the stock-to-flow model value.

• If this trend continues in future halvings, we might end up with a bitcoin price close to the stock flow model value.

Bitcoin Strength and Realized Cost Price

In this section, the speaker discusses two charts related to Bitcoin strength and realized cost price.

Bitcoin Strength

• The RSI chart shows that Bitcoin is regaining strength.

• An RSI index above 50 indicates an uptrend while below indicates a downtrend.

• Starting this month, it's in an uptrend indicating momentum that could lead to another bull market.

Realized Cost Price

• The realized cost price chart is derived from Unchained data showing the cost price of all Bitcoins ever bought when they were last bought.

• It's more like a moving average and not the stock-to-flow model.

• Some people misunderstand this chart and think it's the stock-to-flow model because of its step-like pattern.

Realized Prices and Bitcoin Price

In this section, the speaker discusses realized prices and how they relate to the Bitcoin price.

Realized Prices vs Bitcoin Price

• The speaker looks at the average cost price weighted by only utxos of that month, which is represented by the light blue line on a chart.

• During bear markets, the Bitcoin price is below all realized prices, as shown by red dots in 2015, 2018-19, and 2022.

• When a bull market starts, if the Bitcoin price starts rising above the realized price first, then short-term holders realize their profits within five months.

• Eventually, the Bitcoin price rises above both short-term and two-year realized prices.

Two-Year Realized Price

In this section, the speaker talks about the importance of two-year realized prices.

Importance of Two-Year Realized Price

• The two-year realized price is represented by a blue line on a chart.

• When Bitcoin goes above the two-year realized price during a bull market, it's an important point to watch for.

• The current calculated value for two-year realized price is $32k but has come down to $29.5k recently.

• If the two-year realized price starts moving up again in future bull markets, it may go up as high as stock-to-flow (S2F) price of $66k.

Conclusion

In this section, the speaker concludes his discussion on realized prices and their relation to Bitcoin's value.

Final Thoughts

• It's important to keep an eye on when Bitcoin goes above its realized prices during bull markets.

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