Will the Bitcoin rally continue? A key sign that the bear market is over.

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Bitcoin has soared nearly 40% so far in 2023 as investors return to risk-sensitive assets. The time of dreams

Bitcoin has launched a new bull market, reversing course after more than a year of relentless declines in the cryptocurrency landscape, according to digital asset data and analytics firm CryptoQuant.

Indeed, Bitcoin is on the run. The biggest digital asset has soared nearly 40% year-to-date, topping levels not seen since the bankruptcy of crypto exchange FTX in November shook the market and sent it plummeting to its lowest level. lowest level in two years. Now changing hands at $23,000, the asset has rebounded to six-month highs.

Recent gains belie what a brutal bear market and crypto winter have been. At $23,000, Bitcoin is still a third off its all-time high of around $69,000 in just over a year. Precipitous declines came at the hands of the Federal Reserve, whose inflation-fighting monetary policy and dramatic interest rate hikes also sent the Dow Jones Industrial Average and S&P 500 spinning last year. Allegations of fraud and a string of bankruptcies in the crypto industry have only made matters worse.

2023 ushered in a sea change in sentiment. Investors are optimistic that inflation will slow and that interest rates may even start to fall this year, with traders in turn offering risk-sensitive assets like cryptos and stocks.

This bullish attitude has now translated into bull market techniques, according to CryptoQuant. The tell is in the group’s proprietary PnL Index, which combines three different metrics into a single indicator of Bitcoin’s market value. This figure has now exceeded its 365-day moving average.

Although there is still a possibility that the index will fall back below, the CryptoQuant PnL Index has issued a definitive buy signal for Bitcoin, CryptoQuant detailed in a note on Wednesday evening. Historically, the crossover of indices has signaled the beginning of bull markets.

For those interested in the details, the PnL index combines the MVRV, NUPL and LTH/STH SOPR ratio into a single indicator. These are all various on-chain profitability metrics, referring to metrics based on the blockchain data that underpins Bitcoin.

Market Value to Realized Value (MVRV) is a ratio of Bitcoin’s market capitalization to its realized market capitalization, or the price at which it was last moved, and is used to observe changes in market profitability. .

Net Unrealized Profit/Loss (NUPL) looks at the difference between the number of investors with an unrealized profit and those with an unrealized loss, and is used to determine how profitable or unprofitable the Bitcoin network as a whole is. .

The Spent Output Profit Ratio (SOPR) for long-term holders (LTH) and short-term holders (STH) reflects the profit or loss made when Bitcoin is traded on the blockchain over a set period of time, and similarly reflects profitability.

The confluence of these indicators in PnLs gains confirms an early bull market for now, according to CryptoQuant.

But there are still some downside signs, the data and analytics team noted. This includes subdued Bitcoin inflows to exchanges and a lack of significant transactions from the biggest players in the market.

Nonetheless, the start of a new Bitcoin bull market could be in play. That is, until there are no multiple technical metrics and macro analysis suggesting this rally might be overdone. and vulnerable. Still, with Bitcoin price rising again on Thursday, crypto traders will surely see the bright side.

Write to Jack Denton at [email protected]

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