Key Indicators To Navigate The 2025 Market Cycle

Bitcoin rebounded strongly from bear market lows and reasserted itself as one of the best performing assets of the year. Bitcoin’s outstanding performance in outperforming its counterparts in traditional financial markets has been driven by several key developments. Chief among them were the historic launch of Bitcoin ETFs in January, a new administration signaling support for the crypto industry in the US, and a shift in Federal Reserve monetary policy towards an easing cycle.

Bitcoin ETFs represented a groundbreaking moment, becoming one of the most successful ETF launches in history, surpassing overall 100 billion dollars in assets under management within their first year. This huge inflow of capital helped Bitcoin post a remarkable year-to-date return +126%well above the S&P 500 (+26%), NASDAQ (+33%) and gold (+28%).

While Bitcoin’s short-term volatility often draws attention, its long-term growth trajectory remains robust. At its core, the price of Bitcoin is determined by the interaction of supply and demand, a dynamic that is uniquely transparent thanks to the public nature of the blockchain. This treasure trove of data provides investors with valuable insights into possible price movements.

As we enter 2025, here are five key indicators investors can use to navigate the bull market.

1) Foreign exchange balances / foreign exchange net flows

Centralized exchanges are the epicenters of Bitcoin trading activity, where the majority of trading volume takes place. Active traders and speculators typically store their Bitcoin on exchanges to benefit from rapid price movements and execute trades quickly.

Currently, about 2.5 million Bitcoin, or about 12.6% of the circulating supply, are held on centralized exchanges. This represents a decline of 17% since the beginning of the year, when around 3 million coins were still stored on these platforms.

This decline in FX balances reflects a growing trend of holders withdrawing their Bitcoins, possibly for long-term storage in private wallets, signaling increased confidence in Bitcoin’s long-term value or concerns about centralized FX risks.

Historically, the number of coins on exchanges tends to increase when market euphoria increases and prices head towards a cycle peak. This happens when holders transfer their Bitcoin to exchanges to take advantage of high prices and lock in profits. Therefore, rising foreign exchange holdings can serve as a signal of increased selling pressure and market exuberance, often in advance of a possible price correction. Conversely, falling foreign exchange balances may indicate lower selling interest and more optimistic market sentiment.

When market euphoria reaches its peak, we should expect to see the number of coins on exchanges increase as holders rush to sell their coins at higher prices. Look for the current downtrend to reverse, which could indicate that the bull market is losing momentum.

2) MVRV Z-score

The MVRV Z-Score is a powerful on-chain valuation tool that helps investors identify periods when the market may be at extreme levels, either overvalued or undervalued. It compares Bitcoins Market value– calculated by multiplying the current price by the total circulating supply – to its realized valuewhich represents the average price of Bitcoin at the time of the last transfer between wallets.

By accounting for short-term price fluctuations, realized value provides a clearer view of Bitcoin’s “fair” long-term valuation. The Z-score then uses statistical analysis to highlight significant differences between these two metrics. When the Z-score rises into the pink zone, it indicates that Bitcoin is likely overvalued, which often signals the peak of the market cycle. Historically, these spikes have been accurately detected within two weeks, making it a reliable tool for identifying potential sales opportunities.

On the other hand, when the Z-Score falls into the green zone, it shows that Bitcoin is undervalued relative to its realized value, indicating strong buying opportunities with historically high returns. Compared to the broader MVRV ratio, which tracks general trends, the MVRV Z-Score is more precise at locating market highs and lows, making it an essential indicator for timing investments in Bitcoin’s volatile cycles.

At the time of writing, the MVRV Z-Score is below 3, suggesting that Bitcoin still has a lot of room to run before overheating occurs. Historically, a Z-score above 6 indicates when investors should pay attention and potentially start reducing exposure. In previous cycles, Z-scores above 7 have coincided with the peak of the market cycle.

3) 1+ year HODL wave

The 1+ Year HODL Wave is a useful on-chain analysis tool that examines the age distribution of Bitcoin holdings to assess market sentiment and trends. The indicator categorizes Bitcoin by the time elapsed since the last transfer between wallets. Specifically, the “1+ Year HODL Wave” tracks the percentage of Bitcoins that have remained untouched in wallets for at least a year.

The 1+ year HODL wave is particularly useful for identifying highs and lows in the market cycle as it reflects the psychology of long-term holders. When the price of Bitcoin rises…