Bitcoin’s Price Temperature: Why the Hottest Season is Yet to Come for BTC

• The Bitcoin Price Temperature (BTP) index suggests that Bitcoin might be undervalued, given its current ‘freezing point’ compared to its four-year average.
• The potential approval of a Bitcoin ETF by BlackRock could act as a significant catalyst for a Bitcoin resurgence, despite ongoing concerns about the regulatory climate.

Bitcoin, the leading cryptocurrency, has been treading water for several weeks now, with its value hovering at a ‘freezing point’ as per the Bitcoin Price Temperature (BTP). The BTP, a dynamic index reflecting Bitcoin’s current price relative to its own historical performance and volatility within the four-year market cycles, suggests an undervaluation at present. Negative or decreasing BTP values indicate that Bitcoin’s price relative to its four-year average is relatively low.

This ‘freezing point’ can be traced back to the so-called ‘crypto winter’ following the FTX collapse in November 2022. However, with stabilization efforts in the crypto industry, prices are gradually thawing, led by Bitcoin. While the BTP’s current state doesn’t immediately indicate an impending bull rally, a comparison with the MVRV Z-Score reveals striking similarities in their trajectories.

The MVRV Z-Score measures the ratio of market capitalization to the ‘Realized Value,’ which signifies the actual value stored in Bitcoin. If this ratio is less than 1, it signals an overselling, making a trend reversal more likely. Since the beginning of this year, the value has returned to the positive territory, in tandem with a gradual Bitcoin price rise.

However, an understanding of the complete picture demands consideration of more factors. One of the major potential catalysts for a Bitcoin bull run is the possible approval of a Bitcoin ETF by BlackRock, the world’s largest asset manager. If greenlit, this could give Bitcoin the needed boost.

Still, the Bitcoin ETF stands on shaky grounds, primarily being just an application to the SEC. The US regulatory body has historically rejected all such applications, which, combined with ongoing concerns about the regulatory climate surrounding crypto exchanges Binance and Coinbase and macroeconomic issues, continues to dampen investor sentiment.

Whether a Bitcoin ETF and increasing temperatures, both literally and in terms of the BTP, will unleash the bulls remains to be seen. However, in the realm of cryptocurrencies, much like the seasons, after winter always comes summer, an anticipated warm phase in the crypto market.