Bitcoin recently soared to a record high of $107,000, showcasing a strong bullish sentiment over the past two months. To determine what has driven this upward momentum, two essential on-chain metrics—the True Market Mean Price (TMMP) and the AVIV ratio—offer critical insights into investor behavior and market trends.
Understanding True Market Mean Price (TMMP) and AVIV Ratio
The True Market Mean Price (TMMP) represents the average acquisition cost for Bitcoin holders. It is calculated by dividing the investor cap by the active supply, intentionally excluding miners’ profits to focus on investor-driven acquisition trends. TMMP helps measure the cost basis across the secondary market.
In comparison, the AVIV ratio reflects the relationship between Bitcoin’s active market valuation and realized valuation. This metric highlights whether current prices are significantly above or below the realized cost basis, helping identify overbought or oversold market conditions. Investors often use the AVIV ratio to pinpoint profit-taking opportunities or manage risks during periods of price volatility.
TMMP’s Upward Trend and Its Implications
TMMP has shown a consistent upward trajectory throughout the year, aligning with Bitcoin’s rising price. This steady increase indicates that the market’s higher valuation is backed by sustained investor interest.
As Bitcoin’s price climbed, the gap between TMMP and the market price widened. This increasing divergence reflects substantial unrealized profits among investors. Historically, such gaps have been observed during the late stages of bull markets, often signaling potential volatility or corrections.
AVIV Ratio: Key Signals for Market Peaks
At the start of 2024, the AVIV ratio remained at moderate levels, reflecting a market in accumulation. However, as Bitcoin’s price surged mid-year, the AVIV ratio rose sharply. By December, it reached levels historically associated with overheated markets, resembling patterns seen in 2013, 2017, and 2021.
Spikes in the AVIV ratio occur when market prices significantly exceed realized valuations, often indicating that a local price peak could be approaching. CryptoQuant data further highlights that, despite these spikes, the AVIV ratio and TMMP have remained relatively stable in 2024 compared to previous years. This suggests a maturing market with reduced volatility and more efficient investor behavior.
Stability and Resilience in 2024’s Market Structure
Throughout 2024, fluctuations in the AVIV ratio and TMMP have been less extreme compared to earlier bull runs. This reduced volatility indicates a more stable and resilient market structure. In the past, sharp movements in these metrics often signaled the beginning of bear markets. However, in 2024, consistent investor behavior has supported a healthier market foundation.
The TMMP’s steady rise underscores long-term confidence from investors, as they continue to accumulate Bitcoin at higher price points. Conversely, the elevated AVIV ratio signals short-term correction risks, as investors may capitalize on profits when prices peak.
What to Expect: Short-Term Risks and Long-Term Confidence
Historically, when the AVIV ratio surpasses a value of 2, price retracements have often followed due to increased profit-taking pressure. By December 2024, the AVIV ratio displayed a notable deviation from the TMMP, suggesting a potential cooling phase. However, institutional demand and a growing derivatives market indicate that any correction may be short-lived and relatively mild.
Investor Behavior Highlights a Healthy Bull Market
Data from 2024 reveals a significant trend: investors have continued accumulating Bitcoin at higher prices, steadily raising the market’s overall cost basis. Meanwhile, the late-year spike in the AVIV ratio reflects increased profit-taking activity as Bitcoin achieved new all-time highs.
This dynamic combination of accumulation and profit realization suggests that the current bull market structure remains intact. However, investors should remain cautious of short-term corrections, which often follow sharp upward price movements.
Conclusion: A Balancing Act of Growth and Caution
Bitcoin’s surge to $107,000 marks a significant milestone, driven by consistent investor interest and maturing market behavior. The TMMP’s steady rise and the AVIV ratio’s late-year spike reflect a strong yet cautious market outlook. While short-term corrections remain a possibility, institutional support and evolving market dynamics suggest that Bitcoin’s bullish momentum is unlikely to fade significantly in the near future
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