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Cliff-Notes:
- Bitcoin's network fundamentals reflect strong growth and resilience, with the network's average cost basis rising from ~$26,000 in January to ~$33,000 today, demonstrating increasing fair-value levels for BTC.
- Bitcoin's MVRV ratio has halved since 2021, suggesting reduced unrealized profit and minimized risk of sudden sell-offs, pointing to a stable foundation for further growth.
- Bitcoin's price trajectory aligns with global M2 money supply trends, positioning it as a liquidity-sensitive asset poised for an ascent to $100,000 sooner than later.
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From an on-chain perspective, bitcoin is in an impressively healthy position. While today’s trading level may resemble prices we saw back in 2021 and even earlier in 2024, the network’s underlying fundamentals tell a very different story, showcasing notable growth and resilience.
To illustrate, bitcoin's network cost basis—the average price at which all bitcoin was last transacted—has climbed significantly over recent years. In 2021, the cost basis sat around $14,000, rising to $22,000, then $26,000, and recently hitting $33,000. This increase reflects a robust foundation of holders who acquired their bitcoin at higher average prices, showing long-term commitment to the asset and reinforcing the base at higher levels.
Meanwhile, the ratio of bitcoin’s price to the network’s average cost basis has dropped substantially. In early 2021, bitcoin traded at nearly 4 times its network cost basis (3.98x). Today, that multiple has shrunk to just over 2 times (2.12x), meaning there is less unrealized profit and, by extension, less likelihood of sudden selling pressures in the market. This reduced multiple suggests a healthy, solid base for future growth rather than an overheated market fueled by profit-taking.
This setup means we’re still in the early/mid stages of the current bull market, even if bitcoin’s price remains elevated. With fewer holders sitting on large unrealized profits, there’s greater potential for sustained buying as confidence in higher price levels builds. Bitcoin's proverbial price floor rises cycle after cycle—once $3,000, then $20,000, and now $60,000, raising the level at which bitcoin is considered fairly valued, and laying the groundwork for further price expansion:
Bitcoin is now in a "catch-up trade" with gold, reflecting a delayed response to the same global macro forces that have been driving gold higher since early July. Gold, which began its rally months before the Fed's first rate cut, has been effectively pricing in the effects of global easing and associated inflation concerns for over three months now. As central banks signal the end of tight monetary policy, growth and inflation expectations are on the rise, giving assets like gold and, now, bitcoin, a supportive environment for further gains.
For bitcoin, this move aligns with its reputation as a proxy for global money supply. Following the Fed's rate cuts, the 10-year yield has been trending higher, underscoring the market’s anticipation of increased inflation and growth potential. Bitcoin, which saw a strong early-year bid with the launch of 10 U.S.-based spot ETFs, is now catching up to gold’s recent momentum. This delayed but promising bid indicates that bitcoin is finally positioning itself as a monetary inflation hedge alongside gold in response to the global easing cycle:
This chart captures a remarkable correlation between bitcoin’s price and the global M2 money supply, adjusted forward by 10 weeks to account for bitcoin’s delayed response to the global money supply. With this forward adjustment, the alignment between bitcoin's price and global M2 trends is striking, showing bitcoin’s extreme sensitivity to global money supply changes.
As I pointed out in my X post on September 30th, if bitcoin maintains this trajectory in line with global M2 expansion, it suggests a potential path to $100,000 by the end of 2024. This correlation underscores bitcoin’s role as a global liquidity proxy, reacting predictably to the ebbs and flows of money supply. As M2 expands, particularly in this global easing environment as central banks cut rates and hold their balance sheets steady, bitcoin’s path forward looks primed to continue mirroring this liquidity-driven momentum:
There is roughly $800 million in cumulative short liquidation leverage in bitcoin between the current price of ~$72.6k and $74k. Said differently: there is an $800-million buildup of shorts to be liquidated between here at $74,000. As shorts get squeezed out of their positions and are forced to close out by buying spot bitcoin, it will drive bitcoin's price up further. By the time we've surpassed bitcoin's previous all-time high of ~$73,700, now only 1% away, we are out of the woods and will have liquidated the bulk of these short positions:
The US election is 6 days away, and bitcoin is knocking on the door of a fresh all-time high. Expect a brief cool-off period post-election before bitcoin continues rallying higher, for $80,000 and beyond.
Take it easy,
Joe Consorti
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Theya is the world's simplest Bitcoin self-custody solution. With our modular multi-sig vaults, you decide how to hold your keys.
Whether you want all your keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple iPhones, it's Your Keys, Your Bitcoin.
