Saturday, August 13

Bitcoin on-chain metric suggests 2017-style bull run will continue

Bitcoin’s (BTC) pullback from its all-time high of $ 67,000 to below $ 60,000 has not deterred bulls from seeking another high in the future, according to an indicator attempting to predict market lows and highs.

Called MVRV, the risk metric represents the relationship between the market value of Bitcoin and its realized value, similar to the price / book value (P / B) ratio that compares the market value of a company with its book value. In doing so, MVRV tries to identify whether an asset is undervalued or overvalued.

A bullish setup similar to 2017

An MVRV reading above 3.7 alerts to Bitcoin’s top, prompting sell-offs. On the other hand, an MVRV reading below 1 implies buying pressure on the prospects for Bitcoin to bottom out.

MVRV has historically helped Bitcoin traders detect buy and sell pressures in the Bitcoin market. For example, the orange overlays in the chart below represent the correlation between Bitcoin’s price and its MVRV output.

Bitcoin price vs. MVRV. Source: CryptoQuant

Lennard Neo, head of research, explained in a new Stack Funds report released Nov. 4 that MVRV’s current bounce is similar to that seen during the 2017 bull run, forming a sequence of higher highs and lows (green) of the Bitcoin The price goes up.

Furthermore, MVRV also rebounded in a similar fashion after the May 2021 price drop, dropping below 1 to indicate the undervaluation of the Bitcoin market in that period. The metric rallied well to create higher highs and lows, confirming Bitcoin’s uptrend.

“With MVRV currently trading at 2.72, away from its recent peak of 3.96 in February, we expect more room for growth as it retests the 4.0 level,” Neo wrote in a report published on November 4, adding:

“In case MVRV’s uptrend develops in the near future, Bitcoin’s peak is probably far away.”

Bitcoin at $ 70K?

Neo added that Bitcoin’s recent ability to hold $ 60,000 as a support level indicates its strong willingness to retest $ 67,000, or even extend the bullish move towards $ 70,000.

The analyst mentioned two on-chain metrics in addition to MVRV to explain his bullish outlook. That included metrics that track Bitcoin balances across all crypto exchanges and wallets that contain a large number of BTC tokens.

In detail, the total of Bitcoin held by exchanges around the world reached 2.311 million BTC, its lowest level in more than three years.

Bitcoin is balanced on all exchange reserves. Source: CryptoQuant

The biggest Bitcoin investors also accelerated their wave of accumulation as the price of Bitcoin rebounded from its May-July 2021 crash.

According to Glassnode’s Whale Supply Shock indicator, so-called whales, addresses that hold 10,000 and 100,000 BTC, increased their Bitcoin purchases during the post-July under $ 30,000 rally.

Bitcoin whale supply crash. Source: Glassnode

Dor Shahar, Chain Analyst at CryptoJungle, called it is a sign of “a multi-month accumulation uptrend”, predicting new record highs for Bitcoin as whales remove more supply of BTC from circulation.

Related: Bitcoin Whale Indicator Sees Multi-Month Accumulation Trend As BTC Observes $ 67K Retest

“The relationship between the two groups; whales and other fish gives a measure of the dynamics of the supply,” he said, adding:

“Therefore, [the indicator] it can help to visualize the supply shortage that the coins held by the whales can cause and its effect on the price. Along with that, a more sensitive top macro indication. “

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trade move involves risk, you should do your own research when making a decision.