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Four Charts That Should Make You Go Big on Bitcoin

·6 min read

[Editor’s note: “Four Charts That Should Make You Go Big on Bitcoin” was previously published in June 2022. It has since been updated to include the most relevant information available.]

Cryptos have been plunging lately. So, let me ask you something. If you could go back in time within the past 10 years and make just one investment with the benefit of hindsight, what trade would you place?

Bitcoin (BTC-USD) cryptocurrency with pile of coins, Vector illustrator
Bitcoin (BTC-USD) cryptocurrency with pile of coins, Vector illustrator

Source: Sittipong Phokawattana / Shutterstock.com

Statistically, there’s a right answer here. You should place a buy order on Bitcoin (CCC:BTC-USD) at the end of the 2015 or the 2018 bear markets.

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You see, Bitcoin does this “thing” every few years. It booms. It crashes. Then it bottoms. And it creates the best investment opportunities in the history of the financial markets.

In January 2015, Bitcoin crashes to $170. A year later, it’s up 170%. Two years later, it’s up more than 500%. Three years later, it’s up more than 10,000%.

In December 2018: Bitcoin crashes to $3,000. A year later, it’s up 150%. Two years later, it’s up 1,200%. Three years later, it’s up more than 2,000%.

This is just what BTC does. It booms. It busts. And it booms again.

Well, guess what? Bitcoin is back at it. Following the 2020-21 boom, Bitcoin is busting in 2022. And it’s creating the same generational buying opportunity as in January 2015 and December 2018.

So, don’t worry about the time machine. You won’t need it. History is repeating itself before our very eyes. And today, you can capitalize on a true potential millionaire-maker opportunity.

Let’s dig deeper.

Realized Price Battle

The current crypto crash will inevitably end. And it’ll lead into a new bull market where Bitcoin and certain altcoins will soar in a matter of years.

There’s no question about that. The only uncertainties are when and at what price it happens.

I’ve attempted to answer those questions with four simple charts. And collectively, they paint the picture of a crypto bear market that’s on the cusp of a massive turning point.

In other words, the new crypto bull market could be just around the corner.

The first chart is the realized price chart. It essentially graphs the average cost basis of all Bitcoin investors in the market. Historically speaking, crypto bear markets have bottomed right around Bitcoin’s realized price point at the time. This happened in 2015. It happened in 2018. It briefly happened in 2020.

And it’s happening again right now.

The realized price of BTC today is about $23,300. Currently, BTC trades around $21,000. If history repeats, the big BTC selloff will end around these levels and consolidate around $20,000 for a few months.

Bitcoin realized price chart
Bitcoin realized price chart

That’s point No. 1 on why you should buy the dip in cryptos today. But it’s far from the only reason.

RVT Ratio

The next chart I want to highlight is of the RVT Ratio. This is an obscure metric that compares the Realized Capitalization of BTC against the daily volume of BTC settled on-chain. It’s basically the ratio of Bitcoin’s daily utilization to its intrinsic value.

A high RVT ratio indicates poor network utilization, while a low RVT ratio indicates high network utilization. It follows, then, that low RVT ratios happen during bull markets, and high RVT ratios happen during bear markets.

Interestingly enough, the real-world data here is almost stronger than the theory. In fact, the RVT ratio is highly cyclical and strongly correlated with BTC price action.

The RVT ratio tends to oscillate between near-zero and 90. When it’s near zero, BTC is usually peaking. When it pops above 80 and gets close to 90, it’s usually at a bottom.

Today, the RVT ratio is spiking above 80 and rushing toward 90 for the first time since 2019. That’s when the second crypto bear market bottomed, which itself was the first 80-plus RVT ratio since 2015 (when the first did).

Bitcoin RVT ratio
Bitcoin RVT ratio

Essentially, BTC’s RVT ratio is doing something today that it’s previously only done when Bitcoin bottoms after a big selloff.

See why I’m starting to get super bullish? The data is very compelling!

Bitcoin Dormancy Flows

The third chart I want to highlight is its dormancy flows.

They’re a bit complex. They measure the average amount of coin days destroyed on a per-coin-transacted basis to the market capitalization. The metric’s intent is to capture deviations in spending behavior against market valuation to create a unique look at valuation relative to trading volume.

High dormancy flows imply market overvaluation relative to trading volume fundamentals. Low dormancy flows imply market undervaluation relative to trading volume fundamentals.

Currently, dormancy flows for BTC are collapsing to levels only seen when Bitcoin bottoms after a terrible crash.

Bitcoin entity adjusted dormancy flow
Bitcoin entity adjusted dormancy flow

That’s bullish — really bullish. And it’s a large reason why I think it’s finally time to call a bottom in BTC!

Spent Price

As if you needed another chart to convince you of Bitcoin’s “buy-the-dip” thesis, here’s another: spent price.

Spent price measures the average cost basis of coins that are spent each day. We can further segment that into the average spent price for long-term holders (LTH) and of short-term holders (STH).

Typically, the ratio of LTH to STH spent price is below 1. Long-term holders have lower cost bases than short-term holders, and they also tend to have more conviction. Therefore, in normal markets, the STH spent price is well above the LTH spent price.

But during periods of capitulation, the LTH crowd tends to throw in the towel, too. This leads to the LTH to STH spent price ratio rising above 1. And this only happens when Bitcoin is close to a bottom following a big market selloff.

Guess where we are now?

The LTH to STH spent price ratio has risen above 1 for the first time since March 2020!


In other words, long-term holders are capitulating today in a way that, historically, they’ve only done at market bottoms.

Coincidence? I think not. Color me bullish.

The Final Word on Bitcoin

I really don’t know how to better say this: Bitcoin looks really good here.

The digital token tends to undergo hyperbolic boom-bust-boom cycles. Importantly, each big bust eventually leads to a bigger boom. The critical point at which the bust becomes a boom has provided the best investment opportunities of the century.

And we’re either at or very close to that point right now in the current cycle.

We had the big boom in 2020-21. We’ve had a big bust in 2022. And by 2023, it looks very likely that we’ll enter into a new boom.

The investment implication? We should be buying the dip in BTC right now, at current levels, before it soars in the next boom.

That’s why my colleague Charlie Shrem and I sat down to detail how investors can position themselves to profit in the biggest way possible as this current bust turns into a boom.

Hint: We actually have a top-secret, proprietary model that helps us pick world-changing cryptos at blockbuster prices.

And recently, we unveiled the inner workings of that model to the public for the first time ever. We even gave away the name of one of our favorite cryptos to buy right now, before the next boom cycle kicks into gear.

So… what’re you waiting for? Learn all about it.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

The post Four Charts That Should Make You Go Big on Bitcoin appeared first on InvestorPlace.