Preface:The digital asset market continues to exhibit impressive relative performance,BTC and ETH have both appreciated significantly relative to the US dollar and gold.However, within the industry, Bitcoin's dominant position continues to rise, as evidenced by several indicators and methods of observing capital rotation

Preface:

The digital asset market continues to exhibit impressive relative performance,BTC and ETH have both appreciated significantly relative to the US dollar and gold.However, within the industry, Bitcoin's dominant position continues to rise, as evidenced by several indicators and methods of observing capital rotation.

Summary:

• The digital asset market achieved remarkable returns in 2023, with BTC and ETH performing 93% and 39% higher than traditional assets such as gold, respectively.
• Compared to the previous cycle, the adjustment in the two major markets has been significantly smaller, indicating that investor support and positive capital inflows are playing a role.
• Our counterfeit currency seasonal indicators show a meaningful appreciation against the US dollar for the first time since the peak of the market cycle. However, it is worth noting that this is against the backdrop of the continuous rise in Bitcoin's dominant position, with its market value increasing by 110% year-to-date.

In recent weeks, Bitcoin prices have risen by over 30%, partly due to positive developments related to various Bitcoin ETF applications approved by the SEC. Additionally, it is worth noting the relative performance of Bitcoin and digital assets compared to traditional asset classes such as commodities, precious metals, stocks, and bonds.

In this issue, we will explore the impressive relative performance of digital assets in 2023. So far, BTC and ETH have performed significantly better than traditional assets, and their decline compared to previous cycles is also relatively small.

Relative elasticity

The following figure compares BTC and ETH prices priced in gold, demonstrating their performance compared to traditional defensive value storage. In 2023, BTC appreciated by 93% relative to gold, while ETH in gold terms increased by 39%. This strong performance has been achieved against the backdrop of increasing global uncertainty, which may have attracted the attention of many traditional investors.

Relative Performance of BTC and ETH with Gold in 2023

We can see that on a rolling 30 day basis, BTC? And ETH? The returns have been closely correlated in 2023. Both assets have experienced similar declines, but Bitcoin has performed stronger during the uptrend.

We can also see that the relative volatility of these two types of digital assets exceeds that of gold (black), and the two-way price fluctuation of gold is relatively small.

Relative Performance of BTC and ETH with Gold in 202330

The relative strength of digital assets can also be observed by evaluating the deepest correction during macro upward trends. Here, we will evaluate this indicator of ETH as it allows us to see its performance relative to the US dollar (external benchmark) and compare it with market leader BTC (internal benchmark).

We believe that the cyclical low point of ETH/USD is in June 2022 after the collapse of 3AC, Celcius, and LUNA-UST. Afterwards, the deepest adjustment in ETH/USD (relative to local highs) was -44%, during the period of FTX failure. Today, ETH's trading price is 26% lower than its 2023 high of $2118, which is much stronger than the -60% or greater decline seen in previous cycles.

Ethereum: Bull Market Correction Withdrawal

The strength of BTC is also quite evident, with the deepest adjustment in 2023 being only -20.1%. The regular correction of the bull market in 2016-17 exceeded -25%, while in 2019, it fell by more than -62% from its high in July 2019 or $14000.

Bitcoin: Bull correction retreat

A useful reference for evaluating capital rotation in the digital asset market is to look for periods when ETH outperforms BTC. The following figure shows the maximum retracement depth of the ETH-BTC ratio compared to the local high point of the current upward trend.

In the previous cycle, during the bear market recovery phase, the relative retracement of ETH has exceeded 50%, and the current retracement has reached 38%. Of particular interest is the duration of this trend, as the depreciation of ETH relative to BTC has exceeded 470 days so far. This highlights the potential trend between cycles, where Bitcoin's dominance increases over a longer period of time during bear market periods.

We can also use this tool to monitor the turning points in the risk opening and risk closing cycles we mentioned in WoC41 (which will be discussed again later in this version).

ETH: ETH-BTC Ratio Bull Market Correction Withdrawal

This chart provides another perspective on relative performance, displaying rolling quarterly, weekly, and weekly volatility indicators of investment returns for ETH/BTC ratios. Then, the barcode indicator (blue) highlights all three time ranges indicating a period of poor ETH performance relative to BTC.

Here we can see that the recent weakness of the ETH/BTC ratio is similar to that of May to July 2022, with the price ratio reaching the same level as 0.052.

ETH: ETH/BTC ratio quarterly, monthly, and weekly price performance

Investor sentiment trends

After in-depth research on the Ethereum price model, we noticed that the trading price of ETH is $1800, which is 22% higher than the actual price ($1475). The realized price is usually considered as the average cost basis of all tokens in the supply, priced at the price of the last transaction.

This indicates that ETH holders hold an average level of profit, but still lower than the extreme price levels that often occur during bull market frenzies.

ETH: MVRV pricing range

Another way to visualize changes in investor profitability is through the MVRV ratio, which is the ratio between prices and realized prices. In this example, we compare the MVRV ratio with its 180 day moving average as a tool for monitoring trends.

The period when the MVRV ratio is higher than this long-term average indicates that investors' profitability is becoming increasingly meaningful and is usually a signal of market growth. However, despite the positive market performance of ETH from the beginning of the year to the present, based on this indicator, the market is still in a negative momentum. It seems that the aftermath of the 2022 bear market is still slowly disappearing.

ETH: MVRV momentum (180 days)

The Transformation of Confidence

We can also use the InvestorConfidenceinTrend indicator we developed in WoC38 to construct trends in Ethereum investor sentiment by observing the deviation in the cost basis of two subgroups. The purpose of this indicator is to measure the volatility of investor sentiment in Ethereum. These two subgroups include holders and consumers.

• ? Negative emotions refer to consumers having a significantly lower cost base than their holders.
• ? Positive emotions refer to consumers having a significantly higher cost base than their holders.
• ? Transition sentiment refers to when the cost base fluctuates close to the holder's cost base.

By this measurement standard, the market is in a transitional region and shows a positive trend, but the amplitude is relatively small.

ETH: Investors have confidence in trends

Altreason is calculated in US dollars But not calculated based on BTC

Note: "Altseason" refers to the "counterfeit currency season" in the cryptocurrency market, which usually means that other cryptocurrencies outside of Bitcoin begin to rapidly appreciate.

Based on the aforementioned research work, we are able to generate a new alternative currency indicator. In this model, we use the previously defined 'risk preference' environment as the first condition, requiring capital to flow into Bitcoin (BTC), Ethereum (ETH), and Stable Currency. We combine this condition with the second condition, which is the positive momentum within the "total replacement token market value" (excluding BTC, ETH, and stable coins).

Here, we are looking for a period when the total valuation of the counterfeit currency industry is greater than its 30 day SMA. Before Bitcoin exploded from $29500 to $35000, this indicator showed positive signs on October 20th.

Market: Seasonal indicators for counterfeit coins

When evaluating the recent performance of the total market value of counterfeit coins, it is evident that people's confidence in digital assets has increased.

The partial increase led to a 21.3% increase in industry valuation, with only six trading days showing significant percentage changes. This highlights the waterfall effect of investor capital, as the rise in Bitcoin's dominant position often triggers an increase in the valuation of counterfeit coins relative to fiat currencies.

Market: Daily percentage change in the upper limit of counterfeit coins

However, it is important to remember that Bitcoin's dominant position is continuing to rise. Relatively speaking, Bitcoin currently accounts for over 53% of the valuation of the digital asset market, while the dominant positions of Ethereum, counterfeit currency, and stable currency will all decline relatively in 2023. The dominant position of Bitcoin has risen from a cyclical low of 38% by the end of 2022.

Market: relative market value

To end this point, we can compare the year-to-date growth in the total market value of Bitcoin and Shanzhai coin (excluding stable coins). Compared to counterfeit coins, Bitcoin's market value increased by 110% in 2023, which is impressive but relatively small at only 37%.

This highlights an interesting market trend where the counterfeit currency industry outperforms traditional assets such as fiat currency and gold, but clearly lags behind Bitcoin.

Year-to-date performance of global digital asset market value

summary

The digital asset market achieved remarkable returns in 2023, breaking away from its initial recovery phase and entering an upward trend once again.The market adjustment of market leaders BTC and ETH in 2023 is significantly smaller than the upward trend of the previous cycle, indicating that investor support and positive capital inflows are occurring.

Among multiple indicators, including the counterfeit coin indicators we are developing,We have seen a significant increase in the market valuation of the counterfeit currency industry for the first time since the peak of the previous cycle.However, it is worth noting that this performance is measured relative to the legal tender (i.e. USD). In the field of digital assets, Bitcoin's dominant position continues to rise, resulting in BTC's market value increasing by over 110% year to date

Disclaimer: There are risks in the market and investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, viewpoints, or conclusions in this article are in line with their specific situation. Invest accordingly and take responsibility.