VanEck Research: Bitcoin will rise to $180,000 in this cycle. Why?

撰文：Nathan Frankovitz，Matthew Sigel， VanEck

编译：吴说区块链

Under the favorable regulatory environment brought by Trump's election, Bitcoin successfully broke through its historical high. As market attention continues to rise, various key indicators suggest that the strong momentum of this bull market is expected to persist.

As we predicted in September, the price of Bitcoin (BTC) experienced high volatility and an upward trend after the election. Now, Bitcoin has entered an unknown territory with no technical price resistance, and we believe that the next phase of the bull market has just begun. This pattern is similar to the post-election period in 2020, where Bitcoin's price doubled by the end of the year and further increased by about 137% in 2021. With the significant shift in government support for Bitcoin, investor interest is rapidly increasing. Recently, we have seen a surge in investment inquiries, with many investors realizing that their allocation in this asset class is significantly insufficient. While we closely monitor the market for signs of overheating, we reiterate our price target of $180,000/BTC for this cycle, as the tracked key indicators show sustained bullish signals.

Bitcoin Price Trends

Market Sentiment

The 7-day moving average (7 DMA) of Bitcoin reached $89,444, setting a new historical high. On election night, Tuesday, November 5, Bitcoin surged about 9%, reaching a historical high of $75,000. This aligns with our previous observations: as the likelihood of Trump's victory increased, Bitcoin's price rose accordingly. Trump explicitly promised during his campaign to end the SEC's "enforcement regulatory" strategy and to make the U.S. the "world capital of crypto and Bitcoin."

After Trump's election, regulatory resistance turned into a driving force for the first time. Trump has begun appointing pro-crypto officials in the executive branch, and with the Republican Party controlling the joint government, the likelihood of passing related supportive legislation has increased. Key proposals include plans to establish a national Bitcoin reserve and to rewrite legislation related to crypto market structure and stablecoins, with expectations that FIT21 will be rewritten with market- and privacy-friendly terms, while new stablecoin drafts will allow state-chartered banks to issue stablecoins without Federal Reserve approval.

As countries like the BRICS nations explore alternatives like Bitcoin to bypass dollar sanctions and currency manipulation, stablecoins provide a strategic opportunity for the dollar's global outreach. By eliminating regulatory barriers and allowing state-chartered banks to issue stablecoins, the U.S. can maintain the global influence of the dollar and leverage the faster adoption of cryptocurrencies in emerging markets. These markets have a strong demand for financial services, hedging against local currency inflation, and decentralized finance (DeFi).

We expect that SAB will be repealed in the first quarter after Trump's inauguration, either by the SEC or Congress, prompting banks to announce cryptocurrency custody solutions. If Gary Gensler has not resigned, Trump may fulfill his promise to replace the SEC chair with a more crypto-friendly candidate, ending the agency's notorious "regulation by enforcement" era. Additionally, by 2025, U.S. Ethereum (ETH) ETFs will be revised to support staking, the SEC will approve Solana (SOL) ETF's 19b-4 proposal, and the creation and redemption of ETFs in physical form will make these products more tax-efficient and liquid. Given that Trump has previously acknowledged the commonality between Bitcoin mining and artificial intelligence (AI) in terms of energy intensity, energy regulation is expected to ease, leading to cheaper and more abundant baseload energy (such as nuclear), thereby enhancing the U.S.'s global leadership in energy, AI, and Bitcoin.

This election marks a bullish turning point, reversing the capital and job outflow caused by previous hardline policies. By stimulating entrepreneurial vitality, the U.S. is expected to become a leader in global crypto innovation and employment, transforming cryptocurrency into a key domestic growth industry and an important export product for emerging markets.

Bitcoin Dominance

The 7-day moving average of Bitcoin dominance (a measure of Bitcoin's market capitalization relative to the total market capitalization of all cryptocurrencies) rose by 2 percentage points to 59% this month, reaching its highest level since March 2021. Although this upward trend, which began from 40% in November 2022, may continue in the short term, it may soon peak. In September, we noted that Harris's victory might enhance Bitcoin's dominance due to a clearer regulatory status for Bitcoin as a commodity. In contrast, Trump's pro-crypto stance and his expanded cabinet team may drive broader investment in the crypto market. As Bitcoin reaches new highs in an innovation-friendly regulatory environment, the wealth effect and reduced regulatory risks are expected to attract native capital and new institutional investors into DeFi, thereby enhancing returns on smaller projects within the asset class.

Regional Trading Dynamics

At first glance, traders in the Asian market seem to have significantly increased their Bitcoin holdings this month, contrary to the trend in recent years where Asian traders typically net sold while European and U.S. traders net bought. However, the surge in Bitcoin's price on election night occurred during the Asian trading session, likely due to a large number of U.S. investors trading around the election. This unique event makes it difficult to attribute such price fluctuations solely to regional dynamics. Consistent with historical behavior, traders in the U.S. and European trading sessions continued to increase their Bitcoin holdings, maintaining the price performance trend observed in October.

Source: Glassnode, 11/18/24 (Past performance is not indicative of future results.)

Key Indicators

To assess the potential upside and duration of this bull market, we analyzed several key indicators to evaluate market risk levels and possible price tops. This month, our analysis began with perpetual contracts (perps), where the performance of funding rates provides insights into market sentiment and helps gauge the likelihood of market overheating.

Bitcoin prices typically show signs of overheating when the 30-day moving average funding rate (30 DMA Perp Funding Rates) exceeds 10% and persists for 1 to 3 months.

BTC average return compared to perpetual funding rates (January 4, 2020 --- November 11, 2024)

When the 30 DMA annualized Perps fees exceed 10%, BTC price performance

Source: Glassnode, as of November 12, 2024

Since April 2020, we have analyzed periods when the 30-day moving average perpetual contract funding rates exceeded 10%. The average duration of these periods is about 66 days, with an average return of 17% from open to close, although the duration varies significantly across different periods. The only exception was a single-day spike on June 18, 2024, reflecting short-term market sentiment. Other instances lasted for several weeks, highlighting structural bullish sentiment that typically leads to significant short- to medium-term gains.

For example, the high funding rate phase that began on August 31, 2021, lasted for 23 days, followed by a 28-day cooling period, and then resumed for 51 days on October 19. Including this brief interval, the total duration of high funding rates in 2021 reached 99 days. Similarly, the current high funding rate phase that started on November 12, 2024, has lasted for 80 days, followed by a 19-day interval, and then restarted for another 69 days of high funding rates, totaling 168 days, comparable to the 186 days from November 11, 2020, to May 21, 2021. Notably, purchasing Bitcoin on days when funding rates exceed 10% has historically yielded higher average returns over 30, 60, and 90-day time frames compared to days with lower funding rates.

However, data shows a pattern of underperformance over longer time frames. On average, Bitcoin purchased on days when funding rates exceed 10% begins to underperform the market starting from 180 days, with this trend becoming more pronounced over 1 and 2-year time frames. Given that market cycles typically last about 4 years, this pattern suggests that sustained high funding rates are often associated with cycle tops and may serve as early signals of market overheating, indicating greater susceptibility to long-term downside risks.

Bitcoin Cycle Analysis

Source: Glassnode, as of November 13, 2024

As of November 11, Bitcoin has entered a new phase, with funding rates exceeding 10% again. This shift indicates stronger short- to medium-term momentum, as historically, higher funding rates are associated with higher 30, 60, and 90-day returns, reflecting increased bullish sentiment and demand. However, as funding rates remain high, we may be departing from a long-term (1-2 year) return phase that is equally favorable. Given the current supportive regulatory environment for Bitcoin, we expect another high-performance period, similar to the post-2020 election period, when sustained funding rates above 10% drove a 260% increase over 186 days. With Bitcoin currently trading near $90,000, our target price of $180,000 remains feasible, reflecting a potential cycle return of about 1,000% from the cycle trough to peak.

Higher 30-day moving averages (DMA) relative to unrealized profit levels (>0.60 and 0.70) have historically indicated Bitcoin price tops.

BTC average returns compared to 30-day moving average relative unrealized profit (RUP) (November 13, 2016 --- November 13, 2024)

Source: Glassnode, as of November 13, 2024

BTC average returns compared to 30-day moving average relative unrealized profit (RUP) (November 13, 2016 --- November 13, 2024)

Source: Glassnode, as of November 13, 2024

Next, we focus on relative unrealized profit (RUP), another important indicator for measuring whether the Bitcoin market is overheating. RUP measures the proportion of unrealized gains (i.e., paper profits that have not yet been realized through selling) in Bitcoin's total market capitalization. When Bitcoin's price exceeds the last purchase price for most holders, this indicator rises, reflecting more of the market entering a profitable state, thereby indicating market optimism.

Historically, high 30-day moving average (DMA) RUP levels (especially above 0.60 and 0.70) have typically indicated strong market sentiment and potential overheating. As shown in the red zones in the chart, when RUP 30 DMA exceeds 0.70, it often coincides with market tops, as a higher proportion of unrealized profits triggers more profit-taking. Conversely, when RUP levels fall below 0.60, it indicates more favorable market conditions for long-term buying, with historical data showing higher 1-year and 2-year returns for purchases made below this threshold.

Analysis of the past two market cycles indicates that RUP levels between 0.60 and 0.70 typically yield the highest short- to medium-term returns (7 days to 180 days). This range usually reflects the mid-stage of a bull market, where market optimism is rising but has not yet reached excessive levels. In contrast, when RUP exceeds 0.70, returns across all time frames consistently show negative correlation, reinforcing its role as a strong sell signal.

As of November 13, Bitcoin's 30 DMA RUP is approximately 0.54, but daily values have exceeded 0.60 since November 11. According to our detailed data, the risk gradually increases as RUP approaches 0.70, emphasizing the importance of short-term trading within the 0.60 to 0.70 range. However, if the 30 DMA of RUP rises close to 0.70, it may indicate market overheating, and caution should be exercised regarding long-term positions.

U.S. Regional "Cryptocurrency" Search Trends

Source: Google Trends, as of November 18, 2024

The search volume for "cryptocurrency" as a Google search term is an important indicator of retail investor interest and market momentum. Historically, peaks in search volume have closely correlated with peaks in the total market capitalization of the cryptocurrency market. For example, after reaching historical highs in search volume in May and November 2021, significant market declines followed: a roughly 55% correction occurred within about two months after the May peak, while a bear market lasting about 12 months followed the November peak, with a total decline of about 75%.

Currently, the search volume is only 34% of the May 2021 peak, slightly below the 37% local peak observed in March 2024 (when Bitcoin reached its highest price of this cycle). This relatively low search volume indicates that Bitcoin and the broader crypto market have not yet entered a speculative frenzy phase, leaving room for further growth and not yet reaching the mainstream attention levels typically associated with market tops.

Coinbase App Store Ranking

Source: openbb.co, as of November 15, 2024

Similar to Google search trends for "cryptocurrency," Coinbase's ranking in the app store is also an important indicator of retail investor interest. On March 5 of this year, after Bitcoin's price surged about 34% within 9 days and retested the historical high of about $69,000 from 2021, Coinbase re-entered the top 50 in the app store rankings. Although Bitcoin reached a new high of about $74,000 later in the month, retail interest waned as price volatility decreased to summer lows and public attention shifted to the presidential election. However, the breakthrough on election night reignited retail interest, with Coinbase's app store ranking jumping from 412th on November 5 to 9th on November 14. The surge in participation drove further price increases while setting a new record for Bitcoin ETF inflows.

Bitcoin Network Activity, Adoption, and Fees

Daily Transaction Volume: The 7-day moving average of daily transaction volume is approximately 543,000 transactions, down 15% month-over-month. Despite the decline, activity remains strong, at the 96th percentile of Bitcoin's history. Although the number of transactions has decreased, larger transaction loads have offset this impact, as evidenced by the increase in transfer amounts.

Ordinals Inscriptions: Daily inscriptions (NFTs and meme coins on the Bitcoin blockchain) saw a month-over-month increase of 404%, reflecting a resurgence of speculative enthusiasm driven by rising prices and favorable regulatory news.

Total Transfer Volume: Bitcoin transfer volume increased by 118% month-over-month, with a 7-day moving average of approximately $85 billion.

Average Transaction Fees: Bitcoin transaction fees decreased by 5% month-over-month, with an average fee of $3.58 and an average transaction load of approximately $157,000, resulting in a corresponding fee rate of about 0.0023%.

Bitcoin Market Health and Profitability

Profitable Address Ratio: With Bitcoin's price reaching a historical high, approximately 99% of Bitcoin addresses are currently in profit.

Unrealized Net Profit/Loss: This ratio has increased by 21% over the past month, reaching 0.61, indicating a significant improvement in the ratio of relative unrealized profits to unrealized losses. As an indicator of market sentiment, this ratio is currently in the "Belief-Denial" range, corresponding to the phase of rapid expansion and contraction between peaks and troughs in the market cycle.

Bitcoin On-Chain Monthly Dashboard

Source: Glassnode, VanEck Research, as of October 15, 2024

Bitcoin Miners and Total Market Capitalization of Crypto

Mining Difficulty (T):

Bitcoin's block difficulty has risen from 92 T to 102 T, reflecting that miners are expanding and upgrading their equipment fleets. The Bitcoin network automatically adjusts the difficulty every 2,016 blocks (approximately every two weeks) to ensure that each block is mined approximately every 10 minutes. The increase in difficulty indicates intensified competition among miners and represents a strong and secure network.

Total Daily Revenue for Miners:

Miners' daily revenue increased by 30% month-over-month, benefiting from the rise in Bitcoin prices, although BTC-denominated transaction fees decreased by 30%, impacting total revenue.

Volume of Miners Transferring to Exchanges:

On November 18, miners transferred approximately $181 million worth of Bitcoin to exchanges, equivalent to 50 times the previous 30-day average, driving a month-over-month increase of 803% in the 7-day moving average. This extreme fluctuation is the highest level since March, and similar levels were observed before Bitcoin's last halving. Although the sustained high transfer volume from miners to exchanges may indicate market overheating, this peak occurred after a lower summer miner sell-off, suggesting that it is profit-taking for operational and growth purposes rather than a signal of a market top.

Total Market Capitalization of Crypto Stocks:

The 30-day moving average of the MarketVector Digital Asset Equity Index (MVDAPP) increased by 47% month-over-month, outperforming Bitcoin. Major index constituents like MicroStrategy and Bitcoin mining companies directly benefit from the rise in Bitcoin prices through their holdings or mining operations. Meanwhile, companies like Coinbase leverage broader crypto market gains, as rising prices drive expectations for increased trading fees and other revenue sources.

Source: farside.co.uk, as of November 18, 2024