Data Analysis: Bitcoin's short-term return to a reasonable valuation, the next round of bull market capitalization peak value of at least 860 billion US dollars

Foreword: For the future of cryptocurrency assets such as Bitcoin, we can use some valuation methods to help us assess whether assets are undervalued or overvalued. Unfortunately, any valuation method is flawed because the market is dynamic, and as more and more people use them on the market, these signals tend to weaken over time. Overall, we are in the Stone Age to evaluate the value of cryptographic assets. Therefore, we need to adopt a variety of more reliable evaluation models to help us better judge the market trend and maintain a skeptical attitude.

Unlike regular market analysis, this series of articles will only judge whether the assets are currently overvalued or undervalued by evaluating the model and industry conditions. As for whether to buy or sell, these need to be evaluated by investors themselves.

(Note: The greater the maturity of the project, the less likely it is to be controlled. Therefore, the relevant data analysis will be more valuable)

Indicators that can be referenced

Market CAP : Market price multiplied by currency liquidity (ie network value)

According to the data provided by qkl123 , the current market value of the Bitcoin network is approximately $72.366 billion.


(Data from: qkl123 )

Bitcoin Active Addresses : One of the important reference indicators for evaluating the market value of Bitcoin. We can use Metcalfe's Law or Odlyzko's Law to evaluate Bitcoin market capitalization.

Metcalfe's law is an effective reference method for calculating network value. The original formula is: network value = c * n^2 ;

The Odlyzko's law formula changed n^2 to n * log n , which in the view of Ethereum founder Vitalik is a formula more in line with the evaluation of the value of the blockchain network.

The n is the number of active addresses. Through historical data, we can calculate a c value, which is then used to measure the theoretical value of the network every day.

The resulting ratio, called the NVM ratio, has the following formula:


When the actual market value is greater than the estimated market value, the NVM ratio will be greater than 0 and less than 1, indicating that the market value is overestimated. When the NVM ratio is less than 0 and greater than -1, the market value is underestimated, and the larger the value deviation is The greater the degree of overestimation or underestimation.

We can help us determine the valuation of Bitcoin by observing the number of active addresses directly. According to the data provided by, Bitcoin's recent active addresses are equivalent to the number of active addresses in July-August 2017, indicating that the actual valuation of Bitcoin should be close during these two periods.


(Data from

Realized Market Value (REALISED CAP) : The value of all currencies in circulation, calculated as the price at which they were last moved, in other words, the value of the investor's total investment in the bitcoin market. (Proposed by: Coinmetrics)


(Data from

By observing the data, we can see that from January 2018, Bitcoin's realized market capitalization (REALISED CAP) has been declining, from the high point of 90.6 billion US dollars to the current about 76.085 billion US dollars (notable is A few days ago, the realized market value of BTC reached a phased minimum of 760.01 billion US dollars).

It can be said that before November 2018, the realized market value of Bitcoin (REALISED CAP) has been lower than the actual market value of Bitcoin, which indicates that the price of Bitcoin was still in the overvalued stage, and after that, Realizing the market value (REALISED CAP) achieved a go-ahead. At the moment, the two are close to being equal.

The latest data from this indicator indicates that the current bitcoin price is roughly equal to its market average price.

AVERAGE CAP : This is the “permanent” moving average of market capitalization. It is calculated as the cumulative sum of daily market capitalization divided by the market age in days.


(Data from

According to chart data, the average market value of Bitcoin (AVERAGE CAP) has been growing, with a current value of $24.579 billion. However, due to its "lag" nature, this indicator itself cannot be used for market analysis, but it will be an important part of the next indicator.

DELTA market value : The so-called DELTA market value is the realized market value (REALISED CAP) minus the average market value (AVERAGE CAP), which helps traders capture the bottom of the market, and traders can also track between the realized market value and the average market value. Oscillation, as a time indicator for the beginning of the market and the beginning of the bull market. (The author of this experimental evaluation program is David Puell)


(Data from

According to the data, Bitcoin's DELTA market value reached an all-time high of $78.8 billion in January 2018. Since then, it has slowly declined, reaching a one-year low of $51.48 billion in recent days, and then rebounded slightly today.

We can observe that in mid-December 2018, the market value of DELTA intersects with the actual market value of Bitcoin. Historically, there were two intersections in 2011 and early 2015, which means that the market touched the staged bottom, and currently, both The gap is gradually widening, which is a positive signal.

However, it should also be noted that the fact that the delta cap intersects with the actual market value of Bitcoin does not guarantee that we will not continue to fall in the future, and the market is constantly changing.

But the current DELTA market capitalization indicator tells us that the short-term market is biased towards health .


The intersection of the market value of DELTA and the average market value means the arrival of the bull market. According to the current data, there is still a long period of time (possibly close to 1 year) for the market to usher in a real bull market, and for a long time in the future. The probability will continue to consolidate, but it does not rule out that the platform and IEO's Mavericks will indirectly affect the Bitcoin market. (This also means that this time will be a good investment time)

TOP CAP (top market capitalization) : The average market value is multiplied by 35. This indicator is used to evaluate the top position of the next bull market. Historical data has always matched the market conditions. (The authors are Willy Woo and David Puell)

It needs to be clear that the data is only based on historical data to predict the future. The actual situation will be greatly deviated. According to the current average market value (AVERAGE CAP) data, we can conclude that the market capitalization of the next bull market bitcoin will at least At $860 billion (about 12 times the current market capitalization), and because the average market capitalization (AVERAGE CAP) data is likely to continue to grow, the TOP CAP (top market capitalization) will increase accordingly. Once again, the evaluation plan is still experimental, please refer to it carefully .


(Data from

Bitcoin HODL Wave : This is a visual tool pioneered by Unchained Capital that displays the cross-section of Bitcoin in the wallet and groups them by the age of their last move. The upper line in the figure below indicates the old currency (supply) that has not changed, and the lower line indicates the most recently transferred currency (new demand). The integrated view clearly shows the change in each bull cycle. This visualization tool helps investors accurately pinpoint market opportunities during long-term oscillations between bull and bear markets. For more information, readers can read this article " Bitcoin Data Science (Pt. 1): HODL Waves ".

By looking at the chart changes, we can observe that in the whole year of 2018, the market demand is falling sharply, and at the end of the 18th, the demand has rebounded significantly (the jiacang is obvious), and entered 2019. After the year, the 12-18 months of HODL Wave dropped significantly. They may be new visitors to the previous round of bull market, and the HODLer for more than 2 years is obviously very Buddhist.

From the figure we can observe that the HODLer for more than 3 years, their trading experience is obviously better than the newcomers. When the market is in the rising cycle, they choose to lighten up, and when the market is in a bear market cycle, they will increase the position.

The HODL Wave data of the chart tells us that the market is very similar to the stage at the beginning of the 15th .

P99 (Data from

Cryptographic currency fear and greed index : specifically for Bitcoin's fear and greed index, the higher the index, the greater the risk, the lower the index, the lower the risk. However, because its data source and calculation method are not transparent, although it has reference value, it cannot be too dependent.


We can see that on November 25, 2018, the market index was 9, which is the lowest value since 18 years. On that day, the price of Bitcoin is not low. It can be seen that the accuracy of this indicator is not Very high.

The current market index is 62, which belongs to the category of greed, which shows that the market risk is moderate .

Google (and Baidu) trend : Roughly speaking, Google search volume is positively correlated with Bitcoin market, so the relevant data can be used for reference, but since most of the participants are post-sense, this parameter has Great lag.


(Data from

The more reasonable way to use Google's trend is to take the index. When the market is in a downward trend, the higher the index, the more people are bargain-hunting. When the market is in a rising stage, the higher the index, the more it is. The greater the risk. Looking at the 5 years of historical data, we see that in December 2017, Google Trends' bitcoin index reached 100, indicating that this is the most risky stage in history, and the current Google Trends Index is 5, indicating that the risk of takeover is relatively high. small.

Several indicators that will not be used:

  1. Net inflow of funds and net outflow : The concept of this indicator comes from the stock market. There may be many ways to calculate it. For example, if the price rises at a certain time period, the transaction amount of the time period will be calculated as the capital inflow, and if the price A decline is recorded as a capital outflow, while another method is to calculate an active purchase order. In general, the so-called net inflow and net outflow calculation methods are unscientific and will be very misleading. When the market rises, it shows a net inflow, and when the market falls, it shows For net outflows, it cannot be used to judge the next trend, so investors are not recommended to refer to these indicators.
  2. Large amount of transfer data : The so-called large amount of money transfer may be regarded as a sell signal. In fact, there may be a wallet arrangement and a large intention to induce retail investors to sell. Therefore, large transfers cannot be regarded as effective. reference indicator. (unless a hacker steals a lot of exchange assets, or someone publicly says that they want to sell, to create a panic in the market)
  3. Exchange trading volume changes : As the market brushing situation is too serious (more than 90% of the amount is not true), which leads to greatly reduced data reference.

Adoption of extended solutions such as Segregated Witness, Lightning Network, and Liquid Sidechain

If Bitcoin does not change according to the current infrastructure, there will be an upper limit on its theoretical market value because the number of active users it can have is limited. The application of the technical solution can be used to increase the upper limit, including the chain-extension scheme such as isolation witness and large block expansion, which can increase the upper limit value of the bitcoin chain, and the off-chain scheme such as lightning network and Liquid side chain. , then the value of Bitcoin can be added accordingly. Therefore, the adoption of these schemes is beneficial for the valuation of Bitcoin.


According to the data provided by, the quarantine witness adoption rate is steadily rising, and the corresponding transaction number has been growing, which is beneficial for the valuation of Bitcoin, because if it is fully adopted In theory, the upper limit of the market value of Bitcoin can be expanded several times.

P6 In the lightning network, since the beginning of this year, the capacity of the lightning network channel has shown a good growth trend. According to the data provided by bitcoinvisuals, on March 17, the lightning network capacity reached the historical high of 1080 BTC, currently 1059.8BTC, compared to a slight decline.

Regarding the addition of bitcoin values ​​to the off-chain schemes such as Lightning Network and Liquid Sidechain, there is currently no public calculation method on the market.

But overall, the fundamentals are good for Bitcoin valuation.

to sum up

Through the above data analysis methods, we can see that Bitcoin is currently in a relatively healthy state, its theoretical market value is basically equal to the actual market value, and the fundamentals are good, which is conducive to the increase of bitcoin valuation, and the market From the real bull market, it will take a long time (6-12 months). As for the peak of the next bull market in Bitcoin, according to Willy Woo and David Puell, it is equivalent to 12 times the current market value of Bitcoin. However, this program is a cycle theory based on historical data, which does not necessarily apply to the next bull market. Therefore, we can only refer to it carefully .

For the mainstream cryptocurrency such as Ethereum and Eos, these valuation schemes can be fine-tuned and applied, but the accuracy is not as good as Bitcoin.

This analysis article will be the first in a series of articles, and will be updated from time to time. Welcome to explore the testimony.


Rethinking Network Value to Transactions (NVT) Ratio:


Bitcoin Delta Capitalization

We will continue to update Blocking; if you have any questions or suggestions, please contact us!


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