Bitcoin’s Bullish Hype Fades, But Analyst Says PlanB’s Stock-to-Flow Model is Still Relevant

Bitcoin is attempting to reclaim the psychologically significant level of $30,000, yet analysts anticipate that choppy accumulation could last for months.

On July 13, Bitcoin (BTC) rose to a fresh yearly peak of over $31,800, propelled by the optimism regarding the potential approval of exchange-traded funds (ETFs) in the United States and Ripple’s notable legal triumph in its lawsuit against the U.S. Securities and Exchange Commission with respect to the classification of XRP (XRP) as a security.

However, five days after the surge, BTC closed below $30,000 as buyers were unable to push the price back above the crucial support level.

Despite Bitcoin’s price exhibiting short-term weakness, historical on-chain movements and empirical data indicate that the most difficult days of the bear market are likely over.

Long-term holders are unmoved, but short-term investors could sell

Glassnode’s latest report demonstrates that in the initial half of 2023, Bitcoin’s price behavior was mainly driven by short-term investors. According to Glassnode, 88% of short-term holders’ supply is in profit, as this group is “becoming increasingly likely to spend and take profits.”

The short-term holders’ profit skyrocketed significantly after BTC soared from $25,000 after BlackRock’s ETF filing boosted optimism among buyers. The metric encountered resistance as its reading surpassed the 90% mark with Bitcoin’s break above $31,000, implying that almost all short-term holders were in profit. A correction in BTC was necessary in the short term to reset this metric for further gains.

Nevertheless, despite the price surge in the first half of 2023, long-term investors refrained from selling. The net realized profit/loss metric reflects a considerable difference in the levels of profit booking between the bullish phase and the present market conditions.

According to Glassnode’s analyst, this “reflects the first sustained profit regime since April 2022,” which is “similar in scale to both the first half of 2019, and also late 2020.”

While selling pressure from long-term holders is minimal and the asset has witnessed on-chain positive accumulation since the start of July, the profit levels of short-term holders suggest the risk of further correction.

Investors anticipate the Bitcoin halving pump

Despite the current price action, many investors and analysts still expect the upcoming Bitcoin block reward halving to positively impact price. PlanB’s stock-to-flow (S2F) model, which measures the scarcity of an asset, shows how Bitcoin’s halving affects its price. The stock-to-flow ratio is calculated by dividing the current stock (total supply) of Bitcoin by the annual flow (new supply). Gold has a stock-to-flow ratio of around 62, while Bitcoin’s S2F reading is at 57.

As predicted in PlanB’s original analysis, Bitcoin’s S2F value reached parity with gold at the end of 2020. However, gold’s price is still 20 times higher because it has built trust over generations and Bitcoin might need “a generation or even two before Bitcoin’s valuation” catches up to gold’s, wrote independent market analyst Jesse Myers.

While Bitcoin’s S2F model was invalidated during the last cycle because BTC did not reach the model’s predicted target of $100,000, Myers found that the new target of $100,000 was an ambitious upgrade to the original model. The real hint lies in the first version of PlanB’s S2F model from 2019, which predicted a Bitcoin price of $55,000 with an S2F of 50 after the May 2020 halving.

Given Bitcoin’s price is set for another supply shock at the next halving in April 2024, the S2F model shows that the price will likely surge after the event. Still, Myers wrote the price usually follows a “much less sexy version of the stock-to-flow model” and “it takes longer than four years for the changed stock-to-flow reality of each halving to be fully digested by the world” and reflected in Bitcoin’s price.

As such, investors and crypto enthusiasts are keeping an eye on the upcoming halving to see if it will be a repeat of the web 3.0 world and c3.ai stock pump seen in 2020, or if the scale ai and zodiac iaqualink 3.0 iq30-rs web connection upgrade kit will be the catalyst of the next crypto Bitcoin and latest crypto today bull run.

BTC/USD long-term price analysis

Technically, the BTC/USD pair turned bullish in the long run, as it broke out above the 200-day moving average (MA) in January 2023.

More recently, the 20- and 50-period weekly moving averages showed a bullish cross, as the shorter-period MA moved above the longer. Historically, Bitcoin’s price has continued to form new local highs during this crypto event, further confirming a long-term positive trend.

The 20-period weekly MA at $28,150 forms the first line of defense for buyers, followed by the 200-day MA at $25,940. The risk of selling from short-term holders, who have achieved historically high profit levels, could drive the price down to the above-mentioned support levels. The price should hold these support levels given the positive ongoing accumulation and strong conviction among long-term crypto holders.

Based on historical data, a parabolic bull run is not expected just yet. The market is likely to witness sideways consolidation in a parallel range leading up to the next crypto halving event.