Bitcoin's crucial decision moment: will there be a pullback or will it soar?

Author: Michael Nadeau, Founder of The DeFi Report; Translator: Golden Finance xiaozou

1. Momentum Indicators and On-Chain Key Data

(1) Moving Average

Main Conclusion:

• After Bitcoin formed a "death cross" on April 7, it has now rebounded and broken through all key moving averages—this trend aligns with our previous expectations.

• The subsequent performance of Bitcoin will reveal the market direction: whether it will continue the long-term trend that everyone expects, or maintain a long-term downward trend.

• We expect a pullback at the current level. If a pullback occurs, the key observation is whether Bitcoin can form a higher low above $76,000.

• If it falls below $76,000, pay attention to the support above $70,000. If this level holds, the bull market can continue; if it breaks, it confirms a leftward shift in the cycle, and the downtrend will persist.

• If Bitcoin reaches $95,000 and stabilizes, it is expected to hit a new all-time high.

To this end, let's look at the KPI data to see if we can find clues to predict the next movement of BTC.

(2) ETF Capital Flow

Main Conclusion:

• In 2-3 months, ETF had a net outflow of 3.8 billion USD, and in the first three weeks of April, there was an additional outflow of 600 million USD.

• However, a significant trend reversal occurred this Tuesday with a net inflow of $1.54 billion in a single day (a record high).

• We need to observe whether this trend can continue. We believe that without the participation of the US market and ETFs, it will be difficult for Bitcoin to return to its historical peak.

(3) Spot Trading Volume

In April, the average daily trading volume was $8.7 billion, close to the level when the bull market started in early 2023. On Tuesday, the rebound's daily trading volume was $13 billion, still less than half of the typical trading volume on high volatility days.

In addition, compared to November/December of last year, the average number of active addresses in April decreased by 22%.

Note: Investors should be aware of the reflexive nature of Bitcoin and the crypto market—prices often move first, followed by on-chain activity.

(4) Short-term holders

The current price of Bitcoin ($92,500) is touching the cost line for short-term holders, which forms an important support zone in conjunction with key moving averages.

Long-term holders build support foundations, but the rise in the later stages of the cycle mainly relies on short-term holders to drive it.

Therefore, as long-term holders regain profits from their holdings, we are closely monitoring the on-chain behavior of such groups.

Main Conclusion:

• Since the beginning of February, the holdings of short-term holders have decreased by 11.4%.

• The inflow to the exchange surged to $4.4 billion from Tuesday to Wednesday this week.

• This shows that short-term holders are exhibiting a "paper hands" tendency.

• This is exactly what we saw in March 2022, when the price of Bitcoin briefly rebounded to the cost basis level of short-term holders (after falling from the high of $69,000). In that case, it was a signal that the bear market would last until the end of that year.

(5) Long-term Holders

Long-term holders are returning as buyers, currently controlling 69% of the supply (up from a low of 66% on 2/1/25).

Historical reference:

• 2017 Bull Market Peak: Long-term holding accounted for 51.6%

• 2018 Bear Market Bottom: 67.3%.

• 2021 Bull Market Double Top: First peak 58.9%, Second peak 69%.

• 2022 bear market bottom: 69.5%.

• Peak in December 2024: 67.3%.

Judgment: The current high concentration lays a solid foundation for the market, but ETFs may distort the authenticity of the data.

(6) Supply Ratio of Short-term and Long-term Holders

Short-term holders are transferring their chips to long-term holders, and this ratio hit its bottom when the price peaked last December.

Similar patterns appeared at the cycle tops in 2017/12, 2021/4, 2024/3, and 2024/12.

The last cycle exhibited a "double top" structure: the first peak in March 2021 was driven by short-term holders, while the second peak in November was dominated by long-term holders.

Potential scenario: If history repeats itself, this round may struggle to maintain its upward momentum, but a peak may reoccur in the range of $110,000 to $130,000.

(7) Stablecoins and the Dominance of USDT

The price of Bitcoin is usually highly positively correlated with the increase in USDT circulation (and market share).

It is worth noting that the supply of USDT has remained stagnant at around $140 billion since mid-December last year. At the same time, the supply of USDC has continued to rise (increasing by 47% since mid-December). This phenomenon is similar to the previous cycle—when the supply of USDC continued to grow throughout the bear market, only to see a decline at the end of the third quarter of 2022.

(8) Funding Rate

This Tuesday, the funding rate sharply turned negative as short sellers bet that Bitcoin would encounter resistance and fall back at the $94,000 mark. The current cost of short positions has reached the highest level since August 2023.

This clearly reveals the position layout of traders and speculators. If they misjudge, the market may experience a short squeeze, pushing Bitcoin to break through the $100,000 barrier.

The short liquidation amounts on Tuesday and Wednesday were only $23 million and $13 million, respectively—this moderate figure indicates that the battle between bulls and bears has not yet entered the decisive stage.

(9) MVRV-Z Score Analysis

The current MVRV-Z score of Bitcoin is 2.2. This analysis standardizes data across cycles and markets using the Z score. A Z score of 2.2 means that the current trading price of Bitcoin is 2.2 standard deviations above its historical average. Since January 1, 2017, Bitcoin has been below this level 70% of the time and above this level 30% of the time.

We focused on analyzing the periods when the MVRV-Z score breaks through the 2 level during an upward trend, and specifically selected cases where such breakthroughs occurred for the third time or more within 18 months (as seen currently). Below are the performance returns during these special periods:

In all cases, the 12-month return rate showed negative values.

To maintain the integrity of the research, we also counted all cases since January 1, 2017, where MVRV broke above 2 in a bullish market:

Main conclusion:

• 1-month average return rate: 10.34% (positive return probability 53%).

• 3-month average return rate: 34.25% (positive return probability 55%).

• 6-month average return rate: 59.83% (positive return probability 53%).

• 12-month average return rate: 191% (if excluding the outlier on January 7, 2017, it is 84%), but the probability of positive returns is only 33%.

Overall, buying when the MVRV-Z score breaks above 2 may yield considerable returns, but historical data shows that such opportunities typically arise in the early stages of a cycle (such as early 2017 and late 2020).

(10) Summary of Momentum and On-Chain Indicators

• The on-chain activity has shown a continuous downward trend over the past three months, a phenomenon that is not only present in the Bitcoin network but is also significant on the Ethereum and Solana chains.

• Data shows that this week's market is mainly driven by the Asia-Pacific/China region (although there was a large inflow of funds into the ETF market on Tuesday, this is not reflected in the chart below). While this is a positive sign, we maintain that without strong participation from the U.S. market, Bitcoin will struggle to restart a bull market pattern.

• The growth of stablecoins has shown signs of fatigue—USDT supply has remained stagnant at the level of $140 billion for the past four months. Historical data shows that the slowdown in USDT stablecoin supply growth often coincides with Bitcoin's volatility/consolidation periods (such as from April to October 2024 and September to December 2021, the latter eventually evolving into a bear market).

• The ratio of long-term to short-term holders is a key metric we focus on. As mentioned earlier, long-term holders typically lay the foundation for parabolic trends, while the significant entry of short-term holders is the driving force behind new price highs. Although market conditions can change rapidly, we believe that there are currently no signs of such a shift. A longer period of consolidation will create healthier conditions for new capital to enter.

• MVRV-Z score analysis shows a divergence in short-term return performance, but the 2-3 year outlook is more optimistic. We prefer to position ourselves when Bitcoin approaches the 1 score level (rather than the current level).

• It should be noted that this analysis is based on historical data backtracking. Investors should recognize the reflexive characteristics of the crypto market—price movements often precede narratives and on-chain activities, and the market can shift rapidly.

Final reminder: The data analysis on this chain does not include Bitcoin held by ETFs and centralized exchanges (which accounts for approximately 18.7% of the total supply).

2. Short-term Market Landscape

Is Bitcoin decoupling from Nasdaq?

As global capital withdraws from the US market, discussions about "Bitcoin decoupling from the Nasdaq" are becoming increasingly prominent. We take a cautious stance on this, but not because we don't believe Bitcoin will "decouple." In fact, Bitcoin has historically had a low correlation with the Nasdaq index (the average correlation coefficient since January 1, 2017, is 0.22, with a median of 0.23).

Nevertheless, this year the correlation between Bitcoin and Nasdaq has risen to 0.47, and when Nasdaq is under pressure (on days when Nasdaq's single-day drop is ≥2% since 2017), the correlation coefficient often rises to 0.4.

We believe this correlation will not change in the short term. This raises a question: does Nasdaq have further room to decline? We believe it does.

What is the reason? Despite investors continuously withdrawing from risk assets (see below), the current market is still trading at a 19 times forward price-to-earnings ratio.

Here is a comparison of the bottom price-to-earnings ratios during four major market corrections in history:

• 2022 Bear Market: 15 times (equivalent to the current S&P 500 index of 4248 points)

• COVID-19 pandemic: 13 times (equivalent to 3682 points)

• Major Financial Crisis: 17.1 times (equivalent to 4815 points)

• Internet Bubble: 20 times (equivalent to 5665 points)

Important Background:

• Analysts lowered profit forecasts by 2.2% during the COVID-19 pandemic (adjustment speed was extremely fast), by 4.2% during the 2022 bear market, by 64% during the global financial crisis, and by 38% during the dot-com bubble burst.

[The significant downward revision of profit forecasts during the internet bubble and the global financial crisis led to a passive increase in the market's bottom price-to-earnings ratio]

• As of now, the profit forecast for this year has only been slightly adjusted down by 0.3%.

Meanwhile:

• The scale of corporate layoffs has exceeded the level of major financial crises (mainly government layoffs), but has not yet been reflected in labor market data.

• The survey data such as the Philadelphia Fed Manufacturing Index, new housing starts, Philadelphia Fed new orders, container ship bookings, and trade volume at the Port of Los Angeles all showed weakness.

• The Atlanta Federal Reserve expects negative growth in the first quarter.

• The Federal Reserve remains inactive (the probability of a rate cut in May is only 5%).

• The tariff negotiations are quite complex, and the time required will exceed market expectations, and may escalate further.

In summary, we believe the Trump administration is trying to "step down" the stock market (to lower the dollar exchange rate and interest rates). Nevertheless, the economy may already be bruised. Therefore, we think that when hard data begins to be released, the market may face the next round of decline.

On the other hand, if the following situations arise, the market may still face uncertainty:

• The progress of the tariff agreement is faster than expected.

• The bond market remains stable, with no serious liquidity issues.

• The Trump administration successfully shifted market attention towards tax cuts and deregulation (they are currently pushing these initiatives forward).

3. Long-term Pattern Analysis

The long-term outlook for Bitcoin and the entire cryptocurrency market is extremely optimistic.

What is the reason?

U.S. fiscal deficit

The budget deficit in the United States is expanding rather than contracting!

We acknowledge that we have changed our position multiple times on this issue. However, with Musk announcing that he will leave the White House in May, it is now clear that DOGE is primarily a political stunt, targeting only small fry.

In short, this deficit train is unstoppable. The Treasury is likely to continue to play an important role in providing liquidity. Not only the United States (as we have seen in recent years), but Europe is also increasing its fiscal spending on defense and infrastructure.

We expect the Federal Reserve to expand its balance sheet again in the third/fourth quarter. As this process unfolds, we anticipate seeing monetary suppression/yield curve control, as well as rising global inflation. This will be an environment where investors prefer non-sovereign hard assets (such as gold and Bitcoin) over stocks.

4. Risk Management and Final Conclusion

Our longtime readers know that we like to wait for the "best hitting point" and comfortably hold cash until the opportunity arises.

Buying Bitcoin and other assets (such as SOL) at the lows in 2022 was such a "best hitting point." Increasing positions before the U.S. elections last September (including allocating meme coins) was also such an opportunity.

We also believe that increasing cash holdings in December last year/January this year was a wise decision.

Is now the "best hitting point" for going long on cryptocurrencies?

For us, the answer is no. We see the risks that are about to come. But we like to simplify complexity. We believe the core logic can be summarized as:

If you believe that the global trade and monetary system is undergoing a structural reset (as we think it is), then you can ignore Trump's remarks and instead focus on the real signals conveyed by people like Bessent.

Our view is that this process will take a long time, and we haven't even started the second half of the first round yet. The Federal Reserve is staying put, and we are currently content to wait and see. Therefore, we choose to hold Bitcoin for the long term while maintaining a sufficient cash reserve.

Could we miss out on short-term gains? We accept it calmly. Investment must align with individual risk preferences. Cash is also a position. Given the numerous opportunities in the cryptocurrency market, we choose to remain patient.