One year after Bitcoin’s latest halving, the cryptocurrency scene is drastically different from past cycles. As price surges following past halvings were unprecedented, on the current market cycle Bitcoin’s price increases have been relatively mild. This lackluster performance reflects an enormous turning point. Bitcoin is no longer a simply speculative, ultra-volatile asset class, but rather has matured and developed into a more institutionalized and structured investment.
The current cycle's divergence from historical patterns raises important questions about Bitcoin's future trajectory and its potential for explosive growth. With a much bigger market cap and changing investor dynamics, Bitcoin is taking a different path.
Diminishing Returns
Bitcoin’s combined value on exchanges has gone to greater records. Because of this, continuing to match the electric growth of its initial years has been a difficult hurdle to overcome. The size of the market alone now means it takes much larger capital inflows to shift the price.
One important signpost of this shift is the divergence in long-term holder (LTH) metrics. In particular, the Market Value to Realized Value (MVRV) ratio is of note. This ratio puts Bitcoin’s current market capitalization into context with the entire cost basis of all Bitcoin currently being held. It provides a view into the unrecognized gains that buy-and-hold investors have accrued. In previous cycles, the LTH MVRV ratio soared to extreme highs, signaling massive paper profits and an impending market top. As an example, during the 2016–2020 cycle, the LTH MVRV topped out at 35.8.
The current MVRV high LTH MVRV reading is only 4.35, a significant decline from previous market cycles. This decline represents a state in which long-term holders are sitting on an order of magnitude lower unrealized profits, implying a compressing upside potential.
A Shift in Momentum
In the past, Bitcoin halvings have served as a catalyst for explosive price rallies. These halving events serve to decrease the rate at which new Bitcoin are created, adding an element of scarcity. This reduction in supply could raise demand and raise the price. During the 2020–2024 cycle, Bitcoin skyrocketed by an astounding 436% in the 12 months after the halving.
By comparison, Bitcoin has experienced a much tamer 31% jump since the last halving. This muted response suggests that the halving's impact on price is diminishing, possibly due to the cryptocurrency's increased market maturity and broader adoption. That price increase started much earlier in this cycle. It explicitly phased in beginning October 2024 and December 2024, signaling a notable turn in market conditions.
During the 2020–2024 cycle we saw a maximum decline fall abruptly to 12.2, while at the same time the Bitcoin price was reaching new all-time highs. This rare phenomenon is yet another sign of how the dynamics of the Bitcoin market are changing.
Maturing Market Dynamics
The new trend of lower MVRV peaks is a significant change in Bitcoin’s market dynamics. It’s departing from frenzied, cyclical peaks and valleys, and travelling towards a calmer, more orderly growth accompaniment. Cryptocurrency in general—and Bitcoin in particular—is rapidly being adopted into the financial mainstream. While this demand happens, broader economic factors and institutional investment flows will most certainly determine what direction its price moves in.
The MVRV ratio indicates a squeezing upside potential. This could imply that we have witnessed the final days of Bitcoin’s exponential growth. Rather, investors need to expect far more tempered and sustainable growth, led by greater adoption and real world use-cases. This transition does nothing to undermine Bitcoin’s value proposition. It signals a change in the game when it comes to investing in Bitcoin as an asset.
