One of the great advantages of onchain data is we have a degree of X-ray vision at the poker table. We can't see all the cards, but we can see a lot more than the dude looking at his hand only.
You deserve a lot of credit for putting forth a bold hypothesis—that this cycle is different—and you may be right.
The human mind tends to operate within existing categories. Now that all Bitcoin investors are familiar with the market structure of previous cycles, they naturally expect history to repeat itself. Accordingly, the bulls anticipate a breakout from this range straight to $250K, while some bears predict a bear market with an 80% correction from the ATH.
However, it's worth considering that neither scenario may play out 100% and that we might need a new framework for analyzing Bitcoin’s market structure. If the pattern since 2023 repeats, then months of "chopsolidation" followed by a run to $150K–$160K before becoming top-heavy again—just as you predict—could prove prophetic.
I know that investing strategies vary based on individual situations, but since you’re a young investor, I’m curious about your approach. Do you typically hold through both bull and bear markets, riding out the cycles? Or do you prefer to sell a significant portion at the peak of a bull market to have enough capital to reinvest once the bear market bottoms out?
Would love to hear your thoughts on how you navigate market cycles!
Great question. To date, I am HODL only. I have been around long enough, and have enough experience now that I don't feel the pull of FOMO, nor the spike of fear as much anymore. I genuinely view my BTC as my long term savings, and I treat it as such.
The way I personally solve my portfolio is by thinking about 'what am I saving for?'
- My BTC is for things I need in 5-10yrs time which are expensive (think clearing mortgage, kids, schooling etc).
- My Gold is for things I need in the next 1-3yrs (House deposit, emergency capital, investment opportunity)
- My Cash and income services the next 6-months
So with this as context, right now, I have no need to trade in and out of my BTC. Instead, I prefer to NOT buy high, and buy more aggressively when it is low. Rather than trying to time exits and entries, I reduce the degrees of freedom to just timing better entries for my long term savings, and live my life outside of that.
This works for me personally. That said, Check the Analyst is very aware there are many in the audience who do plan to sell some near the top, and I will of course make the necessary noise when I think such an event is near or close to help connect those dots.
I appreciate your honest answer—it really makes sense. You’re essentially applying the same strategy as buying a good stock at a low entry point and holding it for the long term. That’s sound investing, period. I’m hopeful that as more institutions and countries accumulate Bitcoin as long-term holders, we’ll see increased stability and less severe bear markets in the future.
I am sure the ETFs have a major impact upon STH trading as it is now possible to hold BTC in a registered account and speculate with the click of a button.
Yes and no. Many of the metrics we use to track human sentiment (such as SOPR) only captures coins which are transacting onchain. The idea is we're surveying the people who are spending onchain, and determining their sentiment. We can then apply that 'sentiment profile' to the ETFs, and more often than not, fear in SOPR == outflows in ETF == Low or negative funding rates in futures markets.
When we want to establish confidence in a thesis about a population, we don't have to survey 100% of the population, just a statistically significant subset.
I have huge respect for your work so appreciate the elaboration. On a related topic, it suggests to me how incredibly early we still are with BTC as I would think there would be way more trad investors in it with the advent of the ETFs, increased accessibility and trad investment firms promoting it to clients.
Yes, and this is why I think the SBR is really interesting. Not so much that the gov buys, I don't care too much for that idea. Instead, the signalling it sends to conservative institutions that it is now ok to buy and hold Bitcoin on the balance sheet. This takes the career risk away which has no doubt been a barrier.
The insti world moves slowly, but now they have the green light to get teams spinning the right wheels.
So long as the randomly selected subset reflects the population and I don’t think it does properly as the profile of tradfi investors that represent a growing portion of ETF investors is far more conservative, I would think, and options traders don’t have the same emotional attachment to it. But I may be wrong. I’d be interested in seeing how the change in sentiment that you track correlates with ETF inflows and outflows.
Im not sure I agree fully here, but understand the perspective.
After studying the breakdown of ETF holdings, around 20-25% is institutional, and of that capital, a lot of it is from hedge funds and arbitrage desks. The remaining 75% to 80% of the ETFs is retail, and I would wager a large proportion of them are the very same HODLers who are now allocating their retirement accounts.
Based on the work I have done, I have a pretty strong conviction that the split of HODLer to institutional mentality is still quite relevant across the marketplace. Where institutions may have 'classic smarts', the retail pleb HODLer has 'street smarts'. They have learned by trial and error to think in a generally institutional way after experiencing several 80% drawdowns and then recoveries.
Similarly, hedge funds who has a PnL statement to protect will behave a lot more like a flakey trader who with hop on when times are good, and leave when the momentum dies off.
Ultimately, human sentiment affects everyone, and only the serious pros are able to train themselves to avoid it. When the sentiment runs hot amongst the uninformed, that is also where the strongest momentum attracts the arbitrageurs, and signals to the smart money it may be time to lighten up into strength.
Of course we always operate on incomplete information, but this is where my thinking is at thus far on the topic. I certainly expect it to change and evolve over time, and it already is (we're seeing it in several metrics already). That said, the underlying factors of fear and greed remain, just at a different amplitude.
To add one more relevant anecdote, I was talking with a friend who has been engaging with institutions recently to build out a Bitcoin product. One of the bigger hurdles faced was trying to convince them that Bitcoin HOLDers are actually SUPER conservative. The insti's couldn't understand, aren't they into speculative volatile gambling??
No, they hold the winning ticket, and will be extremely conservative with how it is handled. They despite the concept of yield because they do not trust the mechanisms through which yield is earned.
Your point about the blurring of the lines when it comes to the 4-year cycle is starting to really convince me on the Gold analog theory.
The idea that perhaps the best comparison for what BTC is going through these past 2 years is roughly equivalent to Gold in the early 2000's - gold had its first ETF approved in November 2004, at which time its market cap was around ~ $2T as well. It then went on a 7 year bull run, with -30% corrections along the way, as it got financialised and became less of a pet rock and more of a diversifier in tradfi portfolios.
Obviously this is a lot of hopium, but a man can dream...
And just to elaborate a bit further on this: throughout that 7 year period, gold had to endure not just -20 to -30% corrections, but they were then followed by 6 to 12 months (sometimes more) of brutal sideways chopsolidation.
The similarities with this BTC cycle are enough to make me raise 1 eyebrow, at the very least...
Interesting about the cycles breaking, I agree if a cycle was to break it's this one. What do you think will happen to sentiment with a broken cycle, all the CAGR, best performing asset class, etc are out the window and bitcoin becomes and even harder sell?
The way I look at it, I would assign a pretty decent chance that we're trading up around $150kish within the next 12months. If we tag $75k, that would be a +100% move.
Bitcoin has done =100% moves in the last two years also, so I would say it is a reasonable view that CAGR continues to perform quite well all things considered. I personally don't think gold and BTC are hard sells, and likely will be easy cases to make for many years to come.
Against all the noise, they still have to debase the currency to bail themselves out.
Would love to hear your thoughts on MSTR as a long-term play. I know it’s more volatile than BTC, but that’s kind of the point — the upside during bull runs is historically stronger due to their leveraged exposure and conviction strategy.
Saylor has basically turned MicroStrategy into a bitcoin holding company with over 193,000 BTC on the balance sheet. It’s like getting bitcoin exposure with institutional structure, plus the added kicker of market momentum when BTC moves.
Have you considered including it in your strategy or client portfolios?
Heatmaps are fantastic! However, I cant get my head around the difference between the Reaslised Value Distribution Heatmap and the Supply Distribution Heatmap. Can you help me?
One last question about this one: Aren't the two graphics below showing the same thing, so we cannot speak of two top-heavy signals having triggered? Or where is the difference?
They are showing a similar thing, not the same thing.
Supply in loss == coin count above/below cost basis
Wealth in Loss == unrealised profit nor loss (the delta between cost basis and price for losses exceeds that of coins in profit).
Imagine a scenario where 9 out of 10 STH coins are held under water, but only by 0.1%. The remaining 1 BTC is up 200% in profit.
In this scenario, Supply in Loss would be top heavy (weak signal) but the Unrealised loss would be heavily profit skewed (not top heavy (hard signal). The latter drives the fear response, the former is faster and more sensitive (leading indicator)
People emotionally don't respond to their going being in profit/loss (binary yes/no)
They DO respond when it is massively in profit or loss (magnitude of paper gains/losses). The unrealised loss version is a more responsive and powerful tool because it captures the balance between paper profit vs loss, which is what drives human incentives.
Thanks for another update James. Really appreciate your constant restraint from just posting click baity stuff! I’m sure you’d get more subscribers in the short-term if you just started posting pure moon-math hopium, but glad to see you instead choose being honest and keeping your integrity!
One question: I remember you writing a piece where you asses how top-heavy short-term holders are and I think you were even able to gauge the percentage of how bad it is.. Like whether it is 5% off all-time high or 30% all-time high and then calculate how heavy the losses are in US-terms.
Can you point me to this piece again, so I can refresh my knowledge!
Hi James, been following you for a long time and as always, thanks for the great insight. Question - how do you assess the severity of the current top - heaviness risk to Aug/Sep of 2023? That was also pretty painful and took quite a few weeks to resolve.
Notwithstanding the obvious difference in marco backdrop, how do you compare and contrast the on-chain signals of the two periods?
Gday Harry. I actually think there are reasonable similarities between them. As you noted, the macro backdrop is different, but the rest is actually surprisingly similar from an internal Bitcoin perspective. I think that is a valid reference point for the current correction.
One last question, James. A fellow reader asked how you calculate the metrics so they can recreate them and understand them better. What raw data do you need—just price history, or also volume? Any hints on where we can download this data for free?
I use a variety of resources, but you can get access to both onchain and price data for free from ResearchBitcoin.net, yfinance, CoinMetrics Community etc. There are lots of sources you can refer to
Another great article, thank you. A bit of an unrelated question: Im trying to deepen my onchain understanding by recreating some metrics myself, eg mayer multiple or mvrv. I noticed the z scores are very useful to harmonise those metrics but i wonder how you calculate them, such as the mean and stdev. Do you use rolling ones (eg stdev of the last 4years) or do you calculate one mean and one stdev value based on the entire history of the metric and then calculate the zscore from that?
I usually drop all data before 2012 as a first case, since it's just too noisy back then. Depending on the metric, I will either use an expanding full history, or 4yr rolling Z-score. Metrics where a 4yr is better are usually ones like STH variants, where as bigger ones like Mayer / MVRV are long period enough that full history is usually fine (with 2012 dropped off).
It is a little bit of trial and error to find the periods which work, but in my experience, so long as you're consistent, your thresholds are more important than the period usually.
Great update James - global liquidity says we start going higher soon and we hit a new ATH in Q2. Happy to be here with this team to share the next leg up.
I'm surprised more people aren't using this resource. I'm kind of glad they aren't! I just subbed for a year. I wish I'd found this earlier. I'd have been richer and better educated.
Hi James,
You deserve a lot of credit for putting forth a bold hypothesis—that this cycle is different—and you may be right.
The human mind tends to operate within existing categories. Now that all Bitcoin investors are familiar with the market structure of previous cycles, they naturally expect history to repeat itself. Accordingly, the bulls anticipate a breakout from this range straight to $250K, while some bears predict a bear market with an 80% correction from the ATH.
However, it's worth considering that neither scenario may play out 100% and that we might need a new framework for analyzing Bitcoin’s market structure. If the pattern since 2023 repeats, then months of "chopsolidation" followed by a run to $150K–$160K before becoming top-heavy again—just as you predict—could prove prophetic.
Hey James,
I know that investing strategies vary based on individual situations, but since you’re a young investor, I’m curious about your approach. Do you typically hold through both bull and bear markets, riding out the cycles? Or do you prefer to sell a significant portion at the peak of a bull market to have enough capital to reinvest once the bear market bottoms out?
Would love to hear your thoughts on how you navigate market cycles!
Thanks!
Great question. To date, I am HODL only. I have been around long enough, and have enough experience now that I don't feel the pull of FOMO, nor the spike of fear as much anymore. I genuinely view my BTC as my long term savings, and I treat it as such.
The way I personally solve my portfolio is by thinking about 'what am I saving for?'
- My BTC is for things I need in 5-10yrs time which are expensive (think clearing mortgage, kids, schooling etc).
- My Gold is for things I need in the next 1-3yrs (House deposit, emergency capital, investment opportunity)
- My Cash and income services the next 6-months
So with this as context, right now, I have no need to trade in and out of my BTC. Instead, I prefer to NOT buy high, and buy more aggressively when it is low. Rather than trying to time exits and entries, I reduce the degrees of freedom to just timing better entries for my long term savings, and live my life outside of that.
This works for me personally. That said, Check the Analyst is very aware there are many in the audience who do plan to sell some near the top, and I will of course make the necessary noise when I think such an event is near or close to help connect those dots.
I appreciate your honest answer—it really makes sense. You’re essentially applying the same strategy as buying a good stock at a low entry point and holding it for the long term. That’s sound investing, period. I’m hopeful that as more institutions and countries accumulate Bitcoin as long-term holders, we’ll see increased stability and less severe bear markets in the future.
Nailed it, yes indeed!
I am sure the ETFs have a major impact upon STH trading as it is now possible to hold BTC in a registered account and speculate with the click of a button.
Yes and no. Many of the metrics we use to track human sentiment (such as SOPR) only captures coins which are transacting onchain. The idea is we're surveying the people who are spending onchain, and determining their sentiment. We can then apply that 'sentiment profile' to the ETFs, and more often than not, fear in SOPR == outflows in ETF == Low or negative funding rates in futures markets.
When we want to establish confidence in a thesis about a population, we don't have to survey 100% of the population, just a statistically significant subset.
I have huge respect for your work so appreciate the elaboration. On a related topic, it suggests to me how incredibly early we still are with BTC as I would think there would be way more trad investors in it with the advent of the ETFs, increased accessibility and trad investment firms promoting it to clients.
Yes, and this is why I think the SBR is really interesting. Not so much that the gov buys, I don't care too much for that idea. Instead, the signalling it sends to conservative institutions that it is now ok to buy and hold Bitcoin on the balance sheet. This takes the career risk away which has no doubt been a barrier.
The insti world moves slowly, but now they have the green light to get teams spinning the right wheels.
So long as the randomly selected subset reflects the population and I don’t think it does properly as the profile of tradfi investors that represent a growing portion of ETF investors is far more conservative, I would think, and options traders don’t have the same emotional attachment to it. But I may be wrong. I’d be interested in seeing how the change in sentiment that you track correlates with ETF inflows and outflows.
Im not sure I agree fully here, but understand the perspective.
After studying the breakdown of ETF holdings, around 20-25% is institutional, and of that capital, a lot of it is from hedge funds and arbitrage desks. The remaining 75% to 80% of the ETFs is retail, and I would wager a large proportion of them are the very same HODLers who are now allocating their retirement accounts.
Based on the work I have done, I have a pretty strong conviction that the split of HODLer to institutional mentality is still quite relevant across the marketplace. Where institutions may have 'classic smarts', the retail pleb HODLer has 'street smarts'. They have learned by trial and error to think in a generally institutional way after experiencing several 80% drawdowns and then recoveries.
Similarly, hedge funds who has a PnL statement to protect will behave a lot more like a flakey trader who with hop on when times are good, and leave when the momentum dies off.
Ultimately, human sentiment affects everyone, and only the serious pros are able to train themselves to avoid it. When the sentiment runs hot amongst the uninformed, that is also where the strongest momentum attracts the arbitrageurs, and signals to the smart money it may be time to lighten up into strength.
Of course we always operate on incomplete information, but this is where my thinking is at thus far on the topic. I certainly expect it to change and evolve over time, and it already is (we're seeing it in several metrics already). That said, the underlying factors of fear and greed remain, just at a different amplitude.
To add one more relevant anecdote, I was talking with a friend who has been engaging with institutions recently to build out a Bitcoin product. One of the bigger hurdles faced was trying to convince them that Bitcoin HOLDers are actually SUPER conservative. The insti's couldn't understand, aren't they into speculative volatile gambling??
No, they hold the winning ticket, and will be extremely conservative with how it is handled. They despite the concept of yield because they do not trust the mechanisms through which yield is earned.
Good post as per usual!
Your point about the blurring of the lines when it comes to the 4-year cycle is starting to really convince me on the Gold analog theory.
The idea that perhaps the best comparison for what BTC is going through these past 2 years is roughly equivalent to Gold in the early 2000's - gold had its first ETF approved in November 2004, at which time its market cap was around ~ $2T as well. It then went on a 7 year bull run, with -30% corrections along the way, as it got financialised and became less of a pet rock and more of a diversifier in tradfi portfolios.
Obviously this is a lot of hopium, but a man can dream...
And just to elaborate a bit further on this: throughout that 7 year period, gold had to endure not just -20 to -30% corrections, but they were then followed by 6 to 12 months (sometimes more) of brutal sideways chopsolidation.
The similarities with this BTC cycle are enough to make me raise 1 eyebrow, at the very least...
Interesting about the cycles breaking, I agree if a cycle was to break it's this one. What do you think will happen to sentiment with a broken cycle, all the CAGR, best performing asset class, etc are out the window and bitcoin becomes and even harder sell?
The way I look at it, I would assign a pretty decent chance that we're trading up around $150kish within the next 12months. If we tag $75k, that would be a +100% move.
Bitcoin has done =100% moves in the last two years also, so I would say it is a reasonable view that CAGR continues to perform quite well all things considered. I personally don't think gold and BTC are hard sells, and likely will be easy cases to make for many years to come.
Against all the noise, they still have to debase the currency to bail themselves out.
Hey James,
Would love to hear your thoughts on MSTR as a long-term play. I know it’s more volatile than BTC, but that’s kind of the point — the upside during bull runs is historically stronger due to their leveraged exposure and conviction strategy.
Saylor has basically turned MicroStrategy into a bitcoin holding company with over 193,000 BTC on the balance sheet. It’s like getting bitcoin exposure with institutional structure, plus the added kicker of market momentum when BTC moves.
Have you considered including it in your strategy or client portfolios?
Let me know your take
Derik
I'm liking how the dichotomy between hodler Check and analyst Check is playing out.
Yes! One has a job to do, the other has sats to be stacked.
Hi James,
Heatmaps are fantastic! However, I cant get my head around the difference between the Reaslised Value Distribution Heatmap and the Supply Distribution Heatmap. Can you help me?
Best, Bernhard
Great question.
Supply = units of BTC, where are the literal coins located on the price dimension. 2 BTC = 2BTC irrespective of price.
Realised value = the USD value those coins are worth. 2 BTC at $100k = $200k of realised value. 1 BTC at $10k is 2x less than 1 BTC at $20k.
One last question about this one: Aren't the two graphics below showing the same thing, so we cannot speak of two top-heavy signals having triggered? Or where is the difference?
STH Wealth in Loss:
https://charts.checkonchain.com/btconchain/unrealised/topheavy_unrealisedloss_sth/topheavy_unrealisedloss_sth_light.html
STH Supply in loss:
https://charts.checkonchain.com/btconchain/unrealised/topheavy_supplyinloss_sth/topheavy_supplyinloss_sth_light.html
They are showing a similar thing, not the same thing.
Supply in loss == coin count above/below cost basis
Wealth in Loss == unrealised profit nor loss (the delta between cost basis and price for losses exceeds that of coins in profit).
Imagine a scenario where 9 out of 10 STH coins are held under water, but only by 0.1%. The remaining 1 BTC is up 200% in profit.
In this scenario, Supply in Loss would be top heavy (weak signal) but the Unrealised loss would be heavily profit skewed (not top heavy (hard signal). The latter drives the fear response, the former is faster and more sensitive (leading indicator)
Okay. That is well explained but then I still don't quite get what the current number of 86% in the STH wealth in loss graph actually tells me...
Would be great if you could further explain, so I can finally wrap my head around this!
People emotionally don't respond to their going being in profit/loss (binary yes/no)
They DO respond when it is massively in profit or loss (magnitude of paper gains/losses). The unrealised loss version is a more responsive and powerful tool because it captures the balance between paper profit vs loss, which is what drives human incentives.
Thanks for another update James. Really appreciate your constant restraint from just posting click baity stuff! I’m sure you’d get more subscribers in the short-term if you just started posting pure moon-math hopium, but glad to see you instead choose being honest and keeping your integrity!
This is a great article, James. Recently, I threw my hands up and said, "I have no idea anymore where we are going."
At least after reading your thoughts here, I have some factual data to support my confusion.
This cycle absolutely DOES feel different from the last, and I'm glad I'm not a trader.
It's a circus. I heard it described recently as 'intra-day tarrifs'... very hard to navigate because political games are unpredictable.
amazing work on the heatmap tool! Super excited to start using that.
Amazin piece again! Thank you.
One question: I remember you writing a piece where you asses how top-heavy short-term holders are and I think you were even able to gauge the percentage of how bad it is.. Like whether it is 5% off all-time high or 30% all-time high and then calculate how heavy the losses are in US-terms.
Can you point me to this piece again, so I can refresh my knowledge!
THX as always
I recall the metrics, but I can't recall which post it was in.
I'll be looking around myself.
Is it possible to get an upgrade of these charts?
https://charts.checkonchain.com/btconchain/urpd/urpd_2025-01-08/urpd_2025-01-08_light.html
https://charts.checkonchain.com/btconchain/urpd/urpd_cohort_2025-01-08/urpd_cohort_2025-01-08_light.html
Thanks
Hi Pascal, there is no update to those. That's the URPD profile on that specific date. It is a snapshot of that day.
You will find the latest URPD for today live on the charting site. Those ones will update every day.
ah yes, oversaw that you had an URPD section by now! thanks
Hi James, been following you for a long time and as always, thanks for the great insight. Question - how do you assess the severity of the current top - heaviness risk to Aug/Sep of 2023? That was also pretty painful and took quite a few weeks to resolve.
Notwithstanding the obvious difference in marco backdrop, how do you compare and contrast the on-chain signals of the two periods?
Gday Harry. I actually think there are reasonable similarities between them. As you noted, the macro backdrop is different, but the rest is actually surprisingly similar from an internal Bitcoin perspective. I think that is a valid reference point for the current correction.
One last question, James. A fellow reader asked how you calculate the metrics so they can recreate them and understand them better. What raw data do you need—just price history, or also volume? Any hints on where we can download this data for free?
I use a variety of resources, but you can get access to both onchain and price data for free from ResearchBitcoin.net, yfinance, CoinMetrics Community etc. There are lots of sources you can refer to
Another great article, thank you. A bit of an unrelated question: Im trying to deepen my onchain understanding by recreating some metrics myself, eg mayer multiple or mvrv. I noticed the z scores are very useful to harmonise those metrics but i wonder how you calculate them, such as the mean and stdev. Do you use rolling ones (eg stdev of the last 4years) or do you calculate one mean and one stdev value based on the entire history of the metric and then calculate the zscore from that?
Love to hear this.
I usually drop all data before 2012 as a first case, since it's just too noisy back then. Depending on the metric, I will either use an expanding full history, or 4yr rolling Z-score. Metrics where a 4yr is better are usually ones like STH variants, where as bigger ones like Mayer / MVRV are long period enough that full history is usually fine (with 2012 dropped off).
It is a little bit of trial and error to find the periods which work, but in my experience, so long as you're consistent, your thresholds are more important than the period usually.
4yr will be more responsive than full history.
Great update James - global liquidity says we start going higher soon and we hit a new ATH in Q2. Happy to be here with this team to share the next leg up.
Very interesting, feels intuitively correct as well. Thanks for the piece
Thanks Michael.
I'm surprised more people aren't using this resource. I'm kind of glad they aren't! I just subbed for a year. I wish I'd found this earlier. I'd have been richer and better educated.
I try to build the product I wish I has when I got into Bitcoin