Bitcoin at the Crossroads: Protocol Signals, Market Phases, and the Year-End Probability Map
A technical dissection of volatility, on-chain profit metrics, and the shifting dynamics guiding Bitcoin's path into 2026
Executive Summary
CBBI ≈ 75 and Fear & Greed ≈ 46: conviction without mania. Price continues to adhere to the weekly 20-EMA, while the 50-EMA serves as a guardrail for the cycle. M2 is increasing, the DXY is staying below its weekly EMAs, and the on-chain indicators (MVRV Z-Score, Puell Multiple, and miner economics) are stable; the security budget is robust, and mempool pressure is orderly—conditions that have historically preceded measured-move continuation rather than blow-off risk.
Market Structure —Trend Riding the 20-EMA
Since the spring flag breakout, Bitcoin has steadily increased in value. Pullbacks to the 20-week EMA continue to be absorbed; the RSI remains in the 60s, and the MACD is positive but not overextended. The measured move from the previous bull flag still targets the 135–160k range, provided that weekly closes demonstrate consistent acceptance above 120–123k. The first defense is at 112–108k (20W + range retest), while the trend line in the sand is at 100–102k (50W).
Macro Liquidity—M2 Uptrend Supports Risk
The M2 money stock keeps rising and holds above its 20/50-week EMAs. Liquidity regimes don’t dictate daily price movements, but when base money expands and remains above trend, risk assets are bid up, and Bitcoin (BTC) tends to translate that environment into higher price levels and quicker recoveries after declines.
Dollar Headwind Eases—DXY Beneath Weekly EMAs
The U.S. Dollar Index remains trapped under its 20/50-week EMAs. The failed bounces of ACH in a similar posture during the periods of 2016–17 and 2020–21 accompanied the continuation of the BTC trend. A decisive DXY reclaim would dull momentum; until then, the macro breeze blows at our backs.
On-Chain Valuation—Heat, Not Fever
MVRV Z-Score: Mid-cycle prints—well shy of the 7–9 danger zone that preceded prior blow-offs. There is room to run before the froth.
Puell Multiple: Neutral-positive. Post-halving issuance (≈450 BTC/day) plus disciplined miner treasury behavior equals manageable sell pressure.
Realized Price: The orange cost-basis line keeps climbing; spot trades comfortably above it. This configuration historically marks accumulation → appreciation → acceleration transitions.
Protocol-Level Technicals—Why This Base Is Durable
Difficulty & Hash Rate: Difficulty keeps notching higher with only shallow downward adjustments; the network hash rate sits near cycle highs. That makes deep reorganizations economically absurd and forces any miner distress to appear as difficulty drops long before it threatens settlement finality. You don’t see that.
Security Budget: Miner revenue (subsidy + fees) remains healthy at these price levels; fee share has normalized since post-halving spikes, but sustained base fees during UTXO churn maintain incentives. Security spend per block is orders of magnitude above the attack cost for any realistic adversary.
Orphan/Stale Rates: Orphans remain low, indicating propagation efficiency and healthy relay paths across major pools. That limits non-deterministic variance in confirmation times.
MakeSegWit/Taproot Utilization: Taproot spends and descriptor wallets continue to gain share; larger witness discounts and better batching makes on-chain throughput per sat more efficient—good for fee elasticity during risk-on phases.
UTXO & Address Health: The UTXO set expands with price, indicating onboarding and coin-splitting rather than pure exchange churn. Dormancy remains moderate—long-term holders are not distributing aggressively.
Lightning and L2 Posture: While public capacity has stabilized, private channels remain unclear; however, anecdotal evidence indicates that routing may achieve higher capital efficiency at comparable public capacity levels. For price, this means more transactional demand handled off-chain, reserving base-layer blockspace for high-value settlement without runaway fee spikes.
Cycle Context—Same Playbook, Larger Field
2013: After the halving, there was a consolidation phase that formed a flag pattern, leading to a measured move; the uptrend managed to absorb several 25% dips without dropping below the 20-week moving average.
2017: The market has been above the 20-week moving average for nine months; extreme conditions only occurred when on-chain thermals reached critical levels.
2020–21: Liquidity impulse + issuance shock; Realized Price slope guided every recovery.
In 2025, we observe patterns rather than repetitions: thermals are in the mid-zone, M2 is rising, DXY is capped, and institutions are now providing bids on dips that were previously absent in earlier cycles.
Flows & Risk Checklist
Spot/ETF Creations: Consistent net creations serve as fuel for trends.
Derivatives: Monitor funding and implied volatility (IV)—if they exceed spot inflows, anticipate a cleansing wick.
Miners: No distress signals; any sharp drop in hash price or jump in pool outflows would be a yellow flag.
Levels, Triggers, Invalidations
Support: 112–108k (20W + prior range), then 100–102k (50W).
Trigger: Weekly close >120–123k to activate the 135–160k measured-move path.
Invalidation: A weekly close below the 50W EMA would shift the base case to a longer, choppy consolidation.
Scenarios & Probability Cone (Into Year-End)
Base Case—Trend With Breathers (60%)
Stair-step continuation. Two or three 12–20% pullbacks reset leverage; price resolves into 135–160k by Q4 while on-chain thermals remain sub-extreme.Stretch—Momentum Overshoot (25%)
DXY slumps, M2 stays hot, and net spot/ETF demand spikes. Overshoot prints 170–190k before a late-Q4 mean reversion.Repair—One More Shake-Out (15%)
Macro wobble or leverage bulge forces a fast tag of 110–112k, reclaimed quickly; the year closes at 135–150k.
Expanded Technical Conclusion—Acceleration, Engineered by the Protocol
The concept of 'loose read' resembles the textbook example of the Acceleration Phase because the underlying mechanics align.
Issuance Shock Absorbed: Halvings structurally reduce sell pressure; with Puell in neutral and fees steady, miners aren’t forced sellers. This creates more space for spot demand to determine the marginal price.
Settlement Reliability: High levels of rising difficulty, low orphan rates, and broad pool distribution result in a finality that can be accurately priced. Institutions buy this, literally—hence the resilient bid on every 20W test.
Cost-Basis Uptrend: Realized Price climbing under spot compresses bearish edge. In prior cycles, this slope persisted for months before on-chain overheating; we’re squarely in that window.
Liquidity & FX Tailwinds: Growing M2 and a capped DXY create a permissive macro. We do not need zero rates or QE—just non-tightening paired with structural BTC scarcity.
Demand Pipes Ready: SegWit/Taproot/Lightning ergonomics let transactional load move off-chain while high-value settlement stays on-chain. That keeps fees within range and prevents reflexive miner distress.
Put bluntly: the protocol is paying for world-class security, issuance is throttled, cost basis is rising, and fiat liquidity isn’t fighting us. That’s the recipe that carried prior cycles from appreciation to acceleration. Expect volatility taxes—swift 12–20% purges—but unless the 50W breaks, the path of least resistance remains up, with 135–160k as the rational destination band and upper tails toward the high-$100Ks if macro stays cooperative. History doesn’t repeat; Bitcoin just keeps settling it—one block at a time.
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