Fear Fades, Bitcoin Blazes

Key Takeaways

• Fear and volatility calmed last week, boosting appetite for risk assets and Bitcoin
• This week: key economic data releases (jobs, PCE, GDP) & major tech earnings
• The BTC market value to realized value (MVRV) ratio suggests upside potential

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Digital Asset Commentary

Fear and volatility eased last week, as reflected by declines in both gold and the VIX, creating a favorable environment for risk assets to rise. Investor appetite for Bitcoin strengthened as well, with spot BTC ETFs recording $3B in net inflows after several weeks of muted activity. Additionally, Strategy (MSTR) added another 15,000 BTC to its treasury holdings. Following last week’s sharp rally, digital assets are now more likely to consolidate or pull back slightly this week as they work to normalize around $94k, the yearly open and a high volume price level.

As the month ends this week, a wave of key data releases and events are on deck, including jobs data, PCE inflation, GDP, a quarterly refunding announcement, and earnings reports from MSFT, META, AMZN, and AAPL. PCE is expected to decline from 2.5% to 2.2%, while GDP could turn negative for the first time since Q2 2022. All of this sets the stage for next week’s FOMC meeting, where Powell is unlikely to cut rates but may announce a further reduction of QT to zero. Any signs of pointing towards monetary easing or improved liquidity would be positive for digital assets.

On-chain data also points to potential bullish continuation, supported by relatively low levels of unrealized profit. The MVRV ratio measures the market capitalization of Bitcoin against the realized value of all coins. Realized value is calculated based on the price at which each coin last moved on the blockchain. A high market cap (MV) relative to realized value (RV) is suggestive of significant unrealized profits still held by investors. Historically, spikes in MVRV above 6.0 have coincided with major price cycle tops. Currently, MVRV sits around 2.0, suggesting there is still room for further price appreciation within the ongoing bullish cycle.