What needs to happen before bitcoin enters price discovery mode

This is a segment from the Empire newsletter. To read full editions, subscribe .

No more questioning it: Bitcoin has never been worth this much against the US dollar.

Bitcoin set a bunch of new price records overnight, with the latest — $89,864 — during the super-early hours of Tuesday morning.

That’s 15% above bitcoin’s inflation-adjusted record high from November 2021 ($77,975). Bitcoin has since pulled back to under $87,600 but remains 27% up over the past week.

Bitcoin is now tracking the previous bull market cycle, which spanned from 2018, through the pandemic, to early 2022.

The above chart plots bitcoin’s price performance across major bull cycles as if they all started at once. Our current cycle, which began when BTC bottomed out in November 2022, is in purple.

As of earlier this morning, bitcoin was up 580% since then. At this point in the 2021 bull market, bitcoin had gained 570%, and in the one prior between 2015 and 2018, over 2,000%.

All super impressive, considering bitcoin bull market returns were diminishing every cycle . Until this one, apparently, although it’s early days.

More good news: Tuesday saw another new record for bitcoin beyond its US dollar exchange rate. 

BTC’s market cap jumped as much as $181.55 billion throughout the day — the biggest dollar-denominated intraday spike on record. 

Previous records were $149.32 billion earlier this year, in August, and $146.04 billion in February 2021.

Of course, the dollar figure record is destined to be broken repeatedly as bitcoin rises. Its market cap has never been higher, over $1.72 trillion, to the point that even a moderate surge in percentage terms would add over a hundred billion dollars.

On the above, the top heatmap shows daily growth in bitcoin’s market cap — redder strips represent more billions added in a single day. Yesterday, at the far right end of the spectrum, was the reddest on record.

The bottom otherwise reflects the percentage gains in bitcoin’s price over the same period. Not so hot, at least compared to the period between 2017 and 2021. But it’s all relative.

Speaking of, there’s one more barrier than bitcoin needs to smash before we can really say that we’re in price discovery mode: Bitcoin’s stock market ratio.

Bitcoin’s price against the S&P 500 and the Nasdaq 100 — the stock market equivalents of the ETH/BTC ratio — is still below records set in late 2021.

Earlier today, the BTC/SPX ratio (pink line) was 14.99 compared to 15.34 in March 2021. The BTC/NDX ratio (purple) was 4.26, still 11% below the 4.7 peak, also in March 2021. Bitcoin would need to hit around $95,000 to set new highs against either index., at current prices.

It’s a minor point, but it shows just how hot parts of the stock market were in leadup to the current bitcoin euphoria.

Something tells me that crypto will take it from here.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter .

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter .

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.