Bitcoin (BTC) on-chain analysis – What price target for 2022?

Bitcoin medium-term price projection

Complementing our weekly analysis, let’s introduce a new indicator: the MPRP ratio.

In order to avoid any misinterpretation of what follows, we will together dissect from A to Z the process of creating this new ratio in the most total transparency.

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After having validated the scenario of a liquidity shock with the study of the paradigm shift of the market last week, it is acceptable that the possibility of a double top is ruled out.

It is only a matter of time before the price of Bitcoin (BTC) begins a new phase of increase if we take into account the dynamics of supply and demand over the long term.

But while it is so difficult to detect generational lows and bull market highs, how could we attempt to estimate a mid-term price target for BTC?

The historical analysis of the realized price of BTC, component of its realized capitalization, seems to offer us a way allowing us to project the price of BTC in the near future without playing too much the sorcerer’s apprentice.

The realized price of BTC (in yellow) is obtained by dividing the realized capitalization by the total number of tokens in circulation.

In short, it includes the price at which all the UTxOs were spent for the last time. Composed of many indicators, it is considered to be the overall basic cost of the market.

MPRP BTC 171121

Bitcoin (BTC) MPRP chart – Source: Glassnode

Note that this indicator grows during bull cycles as BTC tokens are sold for profit. Currently, the realized price is around 22,000 dollars and is resuming its ascent.

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Indicator creation

Now that the board is painted, it’s time to have fun with Glassnode’s Workbench tool.

Following the same path as for the MVRV ratio, we obtain the MPRP ratio (in blue) by dividing the spot market price by the realized price.

This ratio determines how far the spot price moves away from or near its base cost and helps determine whether the market is overvaluing or undervaluing the price by 1 BTC.

MPRP BTC 171121

Bitcoin (BTC) MPRP chart – Source: Glassnode

One of the reasons the MPRP is effective at roughly calculating an end of a bullish cycle is that it provides a precise price target, not a cap.

👉 To go further: On-chain analysis of Bitcoin (BTC) – Imminent take-off phase?

Medium-term analysis of the MPRP

While some analysts study the MVRV using a ratio plateau (ex: MVRV> 3 = sell signal or MVRV <0.5 = buy signal), the graphical analysis of the MPRP seems to reveal a basic trend that it would be unwise to ignore.

Lines drawn from the upper and lower trend lines form a huge compression triangle, encompassing the entire realized price history of BTC.

Thus, each time the MPRP reached one of the bounds of this triangle, the market experienced a reversal in the weeks that followed.

This indicator even signaled the local high for Q1 2021 long before price chart analysis suggested it.

MPRP BTC 171121

Bitcoin (BTC) MPRP chart – Source: Glassnode

By focusing on the upper bound, we can project the rise in the MPRP until early 2022 and estimate a next high just below the multiple of 3.5. This means that the price can reach plus or minus 3.3 times the realized price before meeting that trendline again.

If the MPRP were to be at that level today, with a realized price of $ 24,300, the theoretical high would be $ 77,760. However, since the realized price increases dramatically during a bullish phase, suppose it only doubles, reaching $ 48,600.

Based on this projection, the MPRP tells us that for a ratio of 3.3, the market price for the next peak would be expected at the $ 160,000 level (3.3 x 48,600 = 160,380).

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Synthesis

By taking inspiration from the heuristic of the MVRV ratio, we were able to obtain a precise signal, based on the ratio between the spot price and the realized price.

The next macro high should be reached when the MPRP once again meets the upper bound of the compression triangle.

By using a moderate projection of the realized price, we can estimate a new high of the market around 160,000 dollars.

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About the Author: Prof. Chain

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On-chain analyst, fervent fighter in information asymmetry.

My goal is to inform everyone of the state of Bitcoin (as an asset and a distributed network) through the prism of on-chain analysis.
All articles by Prof. Chain.

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