Investing.com -- The Bitcoin bull market "still has room to run," according to a new proprietary indicator from Needham & Company.
The investment firm said Monday that its Crypto Euphoria Needham Diagram (CEND) suggests that despite Bitcoin’s recent rally to record highs, the market is not yet in the extreme euphoria phase that typically precedes a peak.
The CEND index is designed to track where the crypto market stands within its cycle, combining seven metrics that gauge levels of retail enthusiasm, institutional sentiment, and market dynamics. By assigning scores to these inputs, the tool quantifies overall market sentiment, offering a structured approach to identifying periods of excessive optimism or disinterest.
“The higher the score, the more euphoric the crypto markets and hence the more likely the market is to a peak,” Needham explains.
Recently, the CEND hit its highest score of 2024 at 55, surpassing levels from earlier in the year during the “meme coin” mania but still far below the 82 recorded at the peak of the 2021 cycle.
According to Needham, this gap indicates that the market has not yet reached the level of euphoria associated with a cycle top.
“If this crypto cycle sees a full cycle as in prior years, we would expect the CEND to reach higher levels than currently and closer to those seen in 2021--which indicates to us that this market still has room to run longer term,” the firm continued.
Among the key inputs to the CEND, app rankings for platforms like Coinbase (NASDAQ: COIN ) and Robinhood (NASDAQ: HOOD ) have surged this year, signaling a revival of retail interest. Bitcoin’s MVRV Z-score, a measure of market value relative to realized value, has also been climbing, suggesting that the market is entering the middle to later stages of the cycle.
Bitcoin dominance remains high, reflecting continued consolidation into the leading cryptocurrency rather than riskier altcoins—a trend consistent with earlier stages of bull markets.
“Typically, bitcoin dominance reaches its highest levels near the bottom to the beginning of a bull cycle and reaches its lowest point near the top of the cycle,” Needham’s note states. “We note the introduction of bitcoin ETFs in 2024 could skew this metric more this cycle than prior cycles.”
Other metrics, including DeFi leverage, are also on the rise, while Google (NASDAQ: GOOGL ) search interest for “Bitcoin” and “crypto” is recovering but still lags the peaks seen in 2021.
Additional indicators in the CEND include Wall Street’s sentiment on crypto-linked stocks and premiums tied to Bitcoin holdings in publicly traded vehicles. The increasing consensus of "Buy" ratings on crypto-related stocks, such as brokerages and miners, points to rising market optimism.
Meanwhile, MicroStrategy Incorporated (NASDAQ: MSTR )'s stock premium relative to its Bitcoin holdings has become a new proxy for market sentiment in this cycle.