- Blockchain analysis firm Nansen highlights crypto markets’ positive reaction to “good news” stories
- Anthony Pompliano suggests that Bitcoin is now out of “deep value territory.”
- Risk assets are increasingly bullish.
A market report from blockchain analysis firm Nansen highlights renewed momentum for cryptocurrencies despite an ongoing recession in the United States and concerns about continuing inflation.
Nansen’s latest market report highlights that cryptocurrency prices have been reacting asymmetrically, referring to “good news” in the market leading to more price upside than “bad news” generating downside:
“Risk assets, from crypto to equities, via their strong performance, appear to reflect more investor bullishness and a lower risk premium.”
Bitcoin Leaves ‘Deep Value Territory
Cryptocurrency investor and podcaster Anthony Pompliano highlighted the potential of Bitcoin as a ‘value investment’ given its current market price and performance over the past year, in his recent newsletter.
Pompliano’s latest newsletter suggests that Bitcoin was in an undervalued zone for part of 2022 and the first half of 2023, referring to MVRV Z-score, a metric used to measure whether an investment security is under or overvalued.
The metric is based on the deviation between an asset’s market capitalization and realized capitalization. If a market value is significantly higher than realized value, this traditionally signals a market top.
Pompliano draws attention to Bitcoin’s MVRV Z-Score moving out of the green zone midway through 2023 (far right), suggesting that the preeminent cryptocurrency would deviate from a historical trend if its price was to continue rising from this point.
The podcaster also suggested that the correlation between Bitcoin moving out of the undervalued zone and the likes of mainstream asset managers BlackRock and Fidelity applying for spot Bitcoin exchange-traded funds presents another bullish signal:
“You have bitcoin’s price grinding higher, which brings the price closer to the asset’s value, right before you drastically increase demand from the institutional Wall Street world. That seems like a strong tailwind scenario to me.”
Bitcoin Halving in 2024
The wider cryptocurrency markets have seen a surge in investments over the past few weeks, taking Bitcoin above $30,000 per coin for the first time since 2022. Market analysts are already beginning to factor in Bitcoin’s looming mining reward halving in 2024 as a contributor to changing market conditions.
“Bitcoin is officially out of the deep value territory. What happens next is anyone’s guess. It should be an interesting 18-24 months with the halving coming up,” Pompliano said.
Data from Glassnode also shows that Bitcoin investors are beginning to HODL their BTC in the lead-up to the next major halving, which will see the Bitcoin mining reward reduced from 6.25 BTC to 3.125 BTC per block mined.
BTC, which was last active more than a year ago, hit an all-time high of 13.4 million BTC, or 65% of the circulating supply of Bitcoin.
