Bitcoin reaching an all-time high of $107,000 reflects the strong bullish sentiment in the market in the past two months.
To understand what caused the persistent upward momentum this year, we can turn to the true market mean price (TMMP) and AVIV ratio. These on-chain indicators clarify investor behavior and provide insight into cost-basis trends.
The true market mean price (TMMP) is the average acquisition cost for the market, calculated by dividing the investor cap by the active supply. It excludes miners’ profit realizations to isolate investor-driven acquisition trends and measure Bitcoin’s cost basis across the secondary market. The AVIV ratio is often analyzed alongside TMMP, representing the ratio between active market valuation and realized valuation. It measures how far current market prices have diverged from the realized cost basis, showing potential overbought or oversold conditions. AVIV ratio is often used to identify profit-taking opportunities or risks during price volatility.
While TMMP has always been in a steady upward trend, changes in the pace of its increase can help clarify market behavior. The true market mean price has gradually risen throughout the year following Bitcoin’s price increase. The correlation between price increase and TMMP means that higher prices were supported by sustained market interest. As the year progressed, the gap between Bitcoin’s price and TMMP increased significantly, showing substantial unrealized profits for investors. This widening has historically been observed during mature bull markets, often preceding periods of increased volatility or corrections.
Graph showing Bitcoin’s true market mean price (TMMP) and AVIV ratio from July 2010 to December 2024 (Source: CryptoQuant)
The AVIV ratio stood at moderate levels at the start of 2024, consistent with a market in an accumulation phase. By mid-year, as Bitcoin’s price advanced, the ratio climbed higher, reflecting growing investor profits and a strengthening market. In December, the ratio reached levels historically associated with overheated market conditions, similar to patterns seen in 2013, 2017, and 2021. Such spikes in the ratio occur when Bitcoin’s market price significantly exceeds realized valuation, signaling that the market may be approaching a local peak.
Data from CryptoQuant shows an interesting pattern — 2024 has seen relative stability in the AVIV ratio and TMMP compared to previous years. This suggests that the market is maturing and becoming more efficient, with fewer extreme swings in acquisition costs. Historically, significant fluctuations in the AVIV ratio and TMMP have often followed sharp price movements that preceded bear markets. However, the reduced volatility in the AVIV ratio and TMMP throughout 2024 indicates that investor behavior is becoming more consistent, supporting a more resilient market structure.
While the TMMP’s rise signals long-term investor confidence, the AVIV ratio’s elevated level highlights the short-term risks of a correction. Historically, periods where the AVIV ratio exceeds 2 have been followed by price retracements, as profit-taking pressures weigh on the market. December 2024 mirrors these historical trends, with rising AVIV levels and a significant deviation from TMMP indicating a potential cooling phase ahead. However, relentless institutional interest and the growing derivatives market suggest this cooling phase is unlikely to be long-lived or particularly aggressive.
Investor behavior in 2024 supports this analysis. The consistent increase in TMMP suggests that investors have been accumulating Bitcoin at higher prices, raising the overall market cost basis. At the same time, the AVIV ratio’s late-year spike points to profit-taking activity as the market surged to new highs. This combination of accumulation and realized profits reflects a healthy bull market structure but raises caution for a potential short-term correction.
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