Key indicators to navigate the 2025 market cycle

After emerging strongly from its bear market lows, Bitcoin has reasserted itself as one of the best-performing assets of the year. Bitcoin’s stellar performance has outperformed its counterparts in traditional financial markets, and has been driven by several pivotal developments. Chief among them were the historic launch of Bitcoin ETFs in January, the new administration signaling support for the US cryptocurrency industry, and the Federal Reserve’s monetary policy shift toward an easing cycle.

Bitcoin ETFs marked a groundbreaking moment, becoming the most successful ETFs launched in history, collectively surpassing… 100 billion dollars in assets under management during the first year. This massive influx of capital has helped drive Bitcoin’s remarkable year-to-date return +126%significantly outperforming the S&P 500 (+26%), Nasdaq (+33%), and gold (+28%).

While Bitcoin’s short-term volatility often attracts attention, its long-term growth trajectory remains strong. At its core, Bitcoin’s price is determined by the interplay between supply and demand, a dynamic that is uniquely transparent thanks to the public nature of its blockchain. This treasure trove of data provides investors with valuable insights into potential price movements.

As we head into 2025, here are five key indicators investors can use to navigate the bull market.

1) Exchange balances/net exchange flows

Centralized exchanges are the centers of Bitcoin trading activity, and where the majority of trading volume occurs. Active traders and speculators typically store their Bitcoin on exchanges to take advantage of rapid price movements and execute trades quickly.

Currently, about 2.5 million bitcoins, or about 12.6% of the circulating supply, are held on centralized exchanges. This represents a 17% decrease since the beginning of the year, when about 3 million coins were stored on these platforms.

This decline in exchange balances reflects a growing trend for cryptocurrency holders to withdraw their bitcoins, perhaps for long-term storage in private wallets, indicating increasing confidence in the long-term value of bitcoin or concerns about centralized exchange risks.

Historically, as market euphoria increases and prices rise towards the peak of the cycle, the number of coins on exchanges tends to increase. This happens when Bitcoin holders transfer their coins to exchanges to take advantage of rising prices and make profits. Therefore, rising exchange balances can serve as a signal of increasing selling pressure and market exuberance, which often precedes a potential price correction. Conversely, lower exchange balances may indicate decreased selling interest and increased bullish market sentiment.

As the market euphoria reaches its peak, we should expect the number of coins on exchanges to rise, as holders rush to sell their coins at higher prices. Watch for a reversal in the current downtrend, which may indicate that the uptrend is losing steam.

2) MVRV Z-score

The MVRV Z-Score is a powerful on-chain evaluation tool that helps investors identify periods when the market may be in an extreme state, either overvalued or undervalued. He compares Bitcoin Market value– It is calculated by multiplying the current price by the total circulating supply – by its price Realized valuewhich represents the average price of Bitcoin at the time of its last transfer between wallets.

By taking short-term price fluctuations into account, the realized value provides a clearer view of the “fair” valuation of Bitcoin in the long term. The Z-Score then uses statistical analysis to highlight significant deviations between these two metrics. When the Z-Score rises to the pink zone, it indicates that Bitcoin is likely overvalued, which often indicates market cycle tops. Historically, these peaks have been accurately identified within two weeks, making them a reliable tool for identifying potential selling opportunities.

Conversely, when the Z-Score drops to the green zone, it shows that Bitcoin is undervalued compared to its realized value, indicating strong buying opportunities with historically high returns. Compared to the broader MVRV Ratio, which tracks overall trends, the MVRV Z-Score is more accurate in identifying market peaks and troughs, making it an essential indicator of timing investments in volatile Bitcoin cycles.

At the time of writing, the MVRV Z-Score is below 3, indicating that Bitcoin has plenty of room to run before it overheats. Historically, a Z-score above 6 indicates when investors should pay attention and may want to start reducing exposure. In previous cycles, Z-scores above 7 coincided with the top of the market cycle.

3) 1+ year HODL Wave

The 1-year+ HODL Wave is a useful on-chain analysis tool that studies the age distribution of Bitcoin holdings to assess market sentiment and trends. The indicator ranks Bitcoin by the time elapsed since it was last transferred between wallets. Specifically, the “Over One Year HODL Wave” tracks the percentage of Bitcoin that has remained unchanged in wallets for at least one year.

The HODL wave longer than one year is particularly useful for identifying the highs and lows of a market cycle, because it reflects the psychology of long-term shareholders. When Bitcoin price rises towards cycle highs, the 1-year HODL percentage typically declines.

This trend occurs because long-term coin holders start selling their coins to take profits, effectively removing them from the “more than a year” category. During bearish phases or market troughs, the proportion of coins held long-term tends to increase, as holders refrain from selling amid weak market activity.

Investors can use the HODL wave over one year as a predictive tool by observing shifts in owner behavior over the long term. Historically, a sharp decline in the percentage of coins older than one year often indicates that Bitcoin is approaching a major price peak, driven by profit-taking from experienced holders.

An increasing proportion of long-term coins can indicate accumulation phases, where confidence in Bitcoin’s future prospects is high among holders. The current trend indicates that long-term holders have begun to move coins, however, previous cycles suggest that we should see more activity and a greater decline in the ratio before the cycle reaches its peak.

4) Final price

The Final Price Index is a sophisticated on-chain metric used to estimate potential price peaks in Bitcoin market cycles. It is based on a concept Converted pricewhich itself is a derivative of Coin Days Destroyed (CDD).

CDD is a measure of Bitcoin’s economic activity based on how long it has been held. It calculates the product of the number of coins in the transaction and the number of days they were held before being transferred. For example, if 10 Bitcoins were held for 100 days and then transacted, this movement represents the destruction of 1,000 days worth of coins. High CDD values ​​typically indicate that older coins are being transferred, often coinciding with major market events such as price spikes or corrections.

To calculate the final price, the process starts with the converted price, which represents the average CDD across the circulating supply of Bitcoin and the time it was in existence. The converted price thus summarizes the long-term economic activity of Bitcoin and the behavior of its holder. To derive the final price, the converted price is multiplied by 21, which accounts for the fact that the Bitcoin supply is capped at 21 million. This adjustment creates a “terminal value,” effectively normalizing past economic activity via a fixed maximum supply of Bitcoin.

Historically, the final price has proven to be a reliable indicator of the peaks of the Bitcoin price cycle. When the Bitcoin market price approaches or exceeds the final price, it often indicates that the market is overheated and a correction may follow. This makes the indicator especially valuable for identifying potential exit points during bull markets.

The current final price calculation is $188,000, and it is rising every day as the price of Bitcoin rises. Assuming the bull market trend continues, the current cycle should peak above $200,000, if this cycle is similar to previous cycles.

5) Google search trends

Although Google Trends is not an on-chain metric, it provides valuable insight into retail sentiment and overall interest in Bitcoin. Increased search activity typically reflects increased enthusiasm and hype, which often coincides with significant movements in prices or market parameters.

Even though Bitcoin recently reached the $100,000 level, Google search activity is still surprisingly weak. The current trend value is 38, a stark contrast to its maximum value of 100 during Bitcoin’s previous cycle above $60,000 in 2021. This muted response indicates that retail investors have yet to show the widespread euphoria and exuberance that typically appears at market cycle tops.

As Bitcoin continues to hit all-time highs this cycle, we can expect a similar spike in Google search activity. This metric is an important signal of growing retail participation, and often indicates the later stages of a bull market when public interest is peaking.

In conclusion, Bitcoin’s return as a high-performing asset in 2024 underscores its resilience and growing acceptance in the global financial landscape. With the historic launch of Bitcoin ETFs, supportive regulatory signals, and accommodative monetary policy by the Federal Reserve, the foundation for this bull market has been solidified. However, as with any market cycle, navigating the path forward requires a deep understanding of the key indicators shaping Bitcoin’s price path.

Scales on the string e.g Exchange Credits, MVRV Z-Score, 1+ Year HODL Wave, and Final price It’s not a crystal ball, yet it offers invaluable insights into market sentiment, extreme valuations, and potential cycle tops. Combined with external signals like Google search trends, these tools enable investors to make informed decisions, balancing the opportunities of a bull market with its inherent risks.

As Bitcoin moves towards all-time highs, disciplined analysis and strategic planning will be crucial. Whether you’re an experienced investor or a newcomer, keeping track of these indicators will help you capitalize on opportunities while managing risks effectively.