BTC is at the beginning of a "new system" after the price rise in early 2023, and next year will prove to be key.

This is the view of Charles Edwards, founder of quantitative Bitcoin and Capriole Investments, a digital asset fund.

As investment behavior around Bitcoin recovers as online fundamentals and prices recover, Edwards, like many other institutional professionals, may be preparing for an explosive period of growth.

He believes that it is not clear whether the price of bitcoin has hit bottom, but for long-term investors, the allocation of time has only just begun.

In an extensive interview with Cointelegraph, Edwards reflected on the prospects for the bitcoin and cryptographic industries over the next few years, and whether the rebound in 2023 is really tenable.

Looking ahead, halving overall subsidies next year will be particularly important because, in his words, Bitcoin is sure to become "the hardest asset in the world".

Cointelegraph (CT): Bitcoin's NVT index is currently at its highest level in two years. You said it was "a sign of value normalization and the beginning of a new market mechanism". What is NVT? Why is this a big problem?

Charles Edwards (CEO):NVT is often referred to as the bitcoin version of the "price-to-earnings ratio"-a simple yardstick for measuring the relative value of the network. The ratio of NVT= network value to transaction value. It is the ratio of the dollar market capitalization of Bitcoin to the 90-day average dollar trading volume, which flows through the chain transaction of Bitcoin.

The reason is simple. If Bitcoin's network is used to settle a large number of transactions, then it should be more valuable. So when NVT is relatively low, this means that the market undervalues bitcoin relative to the value of transactions that are securely settled.

One way to determine the relative value of NVT is to use the dynamic range NVT;, which applies a two-year Bollinger band to the NVT ratio. Bitcoin has historically been very cheap (value for money) when the NVT reaches the low-end band; when it reaches the high-end band, Bitcoin has been relatively expensive (when managing risk).

Bitcoin spent most of its time in the $160,000-$20,000 range in the second half of 2022, during which time its trading price was in a low NVT range-a sign of great long-term value. As of February 2023, NVT has broken through the fair value. This may be a sign that we are in the early stages of a new bull market under a new system. At the time of this writing, however, NVT is rapidly approaching the overrated range. We haven't done that yet, but we may have some fluctuations in the short term.

CT: how confident are you that Bitcoin is in a "new system" or bull market cycle?

Chief Executive:This is likely to be the beginning of a new mechanism, the early stage of the Bitcoin bull market. We already have all the signs of a typical turning point in values and emotions. This is not to say that I expect the price of bitcoin to rise as sharply as it did in January; the early stages of a Bitcoin bull market usually go through a period of volatility of six to 12 months, as well as an overall slow trend and gradual acceleration. My basic view is that 2023 is positive, and more significant cyclical growth and returns will come in 2024.

Here are some of the reasons why I see a new regime forming today. As of January 2023, we have:

• As defined by many chain indicators, a deep period of value has just ended, including Bitcoin trading at electrical cost in the two months to January. Historically, this is the global price floor for Bitcoin, the second longest time spent on electrical costs in Bitcoin history (the first in 2016).
• In just two months, the price collapse in the third-largest fraud in history has been completely eclipsed. Despite the massive loss of wealth to millions of people in the industry, Bitcoin has proved that there are few marginal sellers left, and even with such negative news, the underlying value of Bitcoin is too high to maintain such a cheap price for a long time.
• It was a major technology price confirmation, confirming the falsehood of the most important price level on the bitcoin chart-the all-time high of $20, 000 and the tipping point of the FTX slump.
• Witnessed a 40% short squeeze, with the same characteristics as the price bottom of China's bitcoin mining ban in 2021.
• It has entered a new upward momentum mechanism, which has been confirmed on several long-term moving averages that are commonly referred to in major markets.
• Bitcoin usually bottoms out in the fourth quarter of 2022 and the first quarter of 2023, which is the best time to halve.
• The contraction of the Bitcoin cycle reached a typical 80% level at the end of 2022.
• In November / December, market sentiment was the worst, with hedging at its highest level on record.
• The Fed is likely to suspend interest rate hikes and change policy in 2023.

What is the significance of breaking $20, 000 a month in CT:1?

Chief Executive:The breakthrough of $20,000 is the most important price change we have seen since hitting an all-time high in 2021. There are many reasons why $20,000 is important:

• This is an all-time high in 2017 (the last Bitcoin cycle).
• This is the price level exposed by the FTX fraud and the collapse of the third largest exchange (and the three largest fraud cases in human history) in 2021.
• This is probably the most important price instruction block level on the bitcoin chart.
• It has the meaning of being the main integer support.
• It is located at the intersection of Bitcoin's electrical costs and production costs; this is where Bitcoin miners have become unprofitable and the level that historically represents the price floor.

When Bitcoin fell below $20,000 in November, it marked the failure of major technical support. This makes most Bitcoin miners unprofitable and is the highlight of fraud, bankruptcy, bankruptcy and negative sentiment in the industry. We spent two months under $20000, and then the 40% short squeeze brought us back above $21000. From a technical point of view, this represents a clear deviation under the main support level, a technical movement that often represents the beginning of a new trend in the opposite direction.

When asset prices suddenly move in one direction, and then soon in the opposite direction, the second direction tends to "stick" and create a higher likelihood of new trends. The probability of the correct step in the second step is significantly higher than that in the first step. That's why false signals like this are so powerful-especially at an important level like $20,000.

CT: compared with previous months, the review of the solvency of exchanges seems to be weakening. Is the collapse of FTX over?

Chief Executive:I think so. The case of FTX is a huge outlier. Bernie Madoff (Bernie Madoff) situation is not common, these are the three most serious fraud cases in history. People panicked and generally turned a blind eye to the situation of FTX-the extremely greedy and immoral behavior of a man named SBF.

As the scale expands, our industry needs to do a lot of work; the legend of SBF is a sad and unnecessary development, but it should not be taken out of context.

We are in a young and emerging industry that is growing at a lightning speed, and as we grow in size, things tend to be broken. Like the share prices of all emerging industries before it, as well as the share prices of any technology start-up, it's like a roller coaster. We cannot expect Bitcoin and passwords to take over the financial world in a smooth straight line; fluctuations occur in prices as well as in larger businesses. It takes time to learn best practices in a new industry, while regulation takes longer to keep up.

With regard to various other platforms, a lot of fear, uncertainty and suspicion (FUD) have spread throughout the industry. At the end of 2022, this led to a bank run on most exchanges, which was unfounded and ultimately not a problem for these fully supported platforms. Exchange risk can be monitored in real time using chain data, which is one of the reasons why Capriole foresaw and avoided a FTX collapse. At the end of 2022, there was no obvious risk close to the same level on other cryptographic platforms.

Nevertheless, it is important to give priority to risk management in everything you do in the field of passwords. Risk management must be above all else. It is important to allocate assets across trusted sources. It is important to learn self-monitoring. Safety is important. Chain monitoring and reporting are important. If you can't proactively manage risk in this round-the-clock industry, there are professional, regulated hedge fund structures that can do it for you. Ensure that due diligence is always done on encryption.

Did the CT:FTX event strengthen or weaken Bitcoin or specific alternative currencies?

Chief Executive:The FTX incident has tarnished the reputation of Bitcoin and encryption institutions. Many institutions were burned down. Large US pension funds have also lost money on FTX. These types of entities take a long time to enter new asset classes such as bitcoin and encryption, causing them to pull down the handbrake on investment activity while waiting for the sea to calm down and regulators to respond.

Unfortunately, it has temporarily slowed down the actions of these larger companies, these companies rely on quarterly board meetings to make such big decisions-but for smaller investors and more innovative and flexible family offices, this is an excellent opportunity.

In the wake of the FTX crash, long-term investments in bitcoin in particular showed incredibly rare value.

For anyone with a multi-year investment vision, according to the chain data we analyzed, $16000 should be an excellent opportunity to allocate to this asset class. At Capriole, we are particularly excited about this, during which time our investment in our fund has doubled. For these reasons, $160,000 to $20,000 is an once-in-a-four-year valuation opportunity for Bitcoin, an incredibly rare opportunity to allocate this asset class at a huge discount in most chained valuation indicators.

The collapse of FTX cleared the market of leverage, bad actors, and a range of risk-managed and poorly run entities. The market now has a clean history, can start a new halving cycle and prepare for organic growth. These institutions will come back; it is only a matter of time before the number of users in an industry doubles every three years. We see savvy investors taking advantage of today's opportunity to make a strong rally.

CT: what is the impact of banning password betting service providers against bitcoin and etheric prices?

Chief Executive:It is hard to be sure, and it will depend on the extent of any ban. If large-scale regulatory action is taken on bets, it will have an impact on prices in the short term. But this fear, like most encryption technologies, is exaggerated. There may be some regulations or restrictions in the area, but I expect the long-term impact to be negligible.

There may be more requirements for betting entities, including data sharing by regulators, which may reduce the size of the market in the short term, but in the medium to long term, this will only transfer the decision on the bet to individual users of the platform.

As we saw when China banned Bitcoin mining in 2021, Bitcoin (and passwords) are now too big for any country to stop its adoption. Bitcoin's hash rate recovered from a 50% collapse in just one year. Compared with the Chinese ban, betting that the ban will be more difficult to implement, may be less serious and the impact will be much smaller.

CT: what are the chances of this happening? Do you expect a full crackdown on password entry on the horizon?

Chief executive (in Cantonese): the Exchange is under a microscope. Global exchanges will have more regulation and more reporting and communication requirements. Many small exchanges will not be able to meet these requirements, which will further consolidate the industry.

I expect all large participants to comply eventually.

In November, we saw how each major exchange used chain data to verify bitcoin holdings of customer assets within a few weeks, thus implementing reserve certificates. Of course, the report has its limitations, but for so many industries, the fact that it has been implemented so quickly around the world shows how fast the industry is growing and how most of us do good and right things here. We need to do more work, and we will do it. It's only a matter of time, and it's part of the natural growth and adoption of the exponential age industry.

CT: what is the biggest danger in the potential bull market cycle of Bitcoin?

Chief Executive:The most obvious risk is if interest rates rise further and by much more than expected. This will squeeze the relative value of Bitcoin. Other things being equal, higher interest rates increase the relative value of the dollar to long-term investors, arguably reducing the value of hard assets such as gold and bitcoin.

However, we have been predicting for some time that the rate hike will stop in 2023, as reflected in today's broader market. The Fed is also signalling to the market that interest rates will peak this year. Historically, the sharp decline in inflation we are seeing now also marks the peak of interest rates.

Given that we are late in the economic cycle, unemployment is at its lowest level in decades and the debt-to-GDP ratio is very high, it is unsustainable to keep interest rates too high today.

All this distorts the possibility of loosening policy to support economic growth. This means that in a world of stubbornly high debt and inflation, Bitcoin will be the perfect investment to combat easing. It's a lot like the 1970s, but even more so today.

CT: what is the biggest tailwind in the potential bull market for Bitcoin?

Chief Executive:In 2024, Bitcoin is sure to be the hardest asset in the world. Bitcoin's inflation rate will fall to half that of gold, replacing gold as the best hedge. Not to mention the improvement in portability, speed and interchangeability of Bitcoin in the digital world.

Each halving of Bitcoin drives a shift in the story, the adoption curve becomes higher, and the 2024 cycle is probably the most important halving we will see. A turning point.

It is worth mentioning that the previous halving was not included in the price, so I expect to continue to get a return of hundreds of% here.

In addition, this decade, we are entering a period of vertical development in which most technologies adopt an "S-shaped curve". In other words, the penetration of new technology from 0% to 10% (at Bitcoin's current level) will take about 10 years, and then it will take another 10 years to fully adopt it.

Given that Bitcoin use is growing faster than the Internet in the late 1990s, all signs are that the next decade will be an incredible decade. The global macroeconomic background seems to support only this adoption curve.

CT: in order to predict the next step of the market, what are your favorite indicators to follow at the moment?

Chief Executive:Predicting short-term trends is a full-time job; we use fully automated quantification strategies to achieve this at Capriole. For investors who want to make a multi-year allocation, the best option is to try to configure at or near the cycle low, and reduce some exposure at the cycle high.

Bitcoin still operates largely on a four-year cycle, driven by a halving of four years. As a result, you usually get a huge value of about 12 months to allocate to the market, while 6-12 months to reduce risk.

It's not about the exact bottom and top time-unless you're monitoring the market full-time, don't bother!

When you get the convergence point of multiple long-term indicators, there are only indicators that have been used for years (without modification) to prove that you are reliable; that is, when you have something useful to take action. My favorites are:

• Hash Ribons (recently hinted to buy at a price of $20, 000)
• NVT
• Ratio of market value to realized value (MVRV)
• Bitcoin production cost and electricity cost
• Bitcoin energy value
• SLRV ribbon
• Dormant flow
• Steady the waves.
• Unrealized net profit and loss (NUPL)

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