The firm’s view is based on an on-chain indicator called the market value to realized value (MVRV) ratio, which measures the spread between bitcoin’s market capitalization and realized capitalization.
The ratio currently stands at 170% or significantly lower than the 300% threshold, historically marking major market tops.
"The bitcoin market value to realized value (MVRV) ratio shows that despite reaching yearly highs, bitcoin is not as overheated yet as during previous bull markets," blockchain analytics firm IntoTheBlock said in the weekly newsletter.
“Historically, bitcoin bull markets have peaked around 300%+ MVRV, which, in comparison to the current 150% value, suggests the bull market has room to run further,” IntoTheBlock added.
Market capitalization refers to the total dollar value of the supply in circulation, as calculated by the daily average price across major exchanges. The realized value, considered a relatively better gauge of fair value, approximates the value paid for all existing coins by adding the market value of coins when they change hands through an on-chain transaction.
Very high values indicate bitcoin's market price is overvalued relative to its realized or fair value, while extremely low values suggest otherwise.
Another factor suggesting bitcoin's peak may be higher than the recent high of $35,000 is the low investor interest in trading meme cryptocurrencies like SHIB.
While bitcoin has surged 27% this month, the notional open interest or dollar value locked in the number of active SHIB perpetual contracts on Binance remains flat at around $35 million, according to Coinglass data. Past data show that bitcoin peaks when meme coin frenzy grips the market, with open interest in SHIB rising above $100 million.
That said, investors should be vigilant about the potential escalation of geopolitical tensions and continued oil rally, with prices topping $100 per barrel. These developments could lead to broad-based risk aversion and put downward pressure on bitcoin.
“Macro forces and potential black swans could bring a correction following the recent appreciation,” IntoTheBlock noted.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.