of bitcoin The brutal January price rally brought most of the market back to profitability for the first time in months. The return to profitability of the bitcoin market is seen in a resurgence in price from the so-called “true value” of around $23,500, which is the average B T c Price at the time each BTC token last moved.
of bitcoin According to data presented by cryptocurrency analytics firm Glassnode, the actual value was around $19,850. Technicians view a break above or below the 200-day moving average (which bitcoin also broke decisively above recently) as a sign of a meaningful change in the medium-term momentum of the market. Let’s look at the break.
But Bitcoin The relation of value to real value and what it means for the market’s outlook is much more nuanced. That’s according to analysts at Glassnode, who offer several more advanced models that look at the difference between bitcoin’s price and its actual price to determine whether the market is trending up or down, or long. The bull or bear market is about to start. ,
And these metrics are sending a unified signal. The medium- to long-term outlook for the bitcoin market is looking good, if history is anything to go by.
MVRV ratio recovering from historically significant lows
Glassnode offers a metric called the Market Value Realized Value (MVRV) ratio – the ratio between the current market, or spot, price and the realized value. They then introduce the ratio levels they think the market is extreme at – 0.8 and 1.0, below which the market is seen as extremely weak and 2.4 and 3.2, above which the market is considered extremely strong. .
As can be seen in the graph above, the MVRV ratio recently recovered above 1.0 after falling below the critical 0.8 level in the wake of FTX’s collapse, indicating extreme market weakness at the time. Another way to visualize the MVRV ratio is through price bands which can be plotted on a chart alongside the spot and realized prices of bitcoin. These essentially show levels that are 0.8 times below and 2.4 and 3.2 times higher than the true value.
As can be seen in the above chart, when bitcoin price is back on the blue line (meaning the price is 0.8 or less than its true value), it has been a great long term buying opportunity. Equally, while bitcoin price has been able to exceed its true value by 3.2 or more times for short periods of time, sharp pullbacks from market peaks typically occur in the medium term.
MVRV momentum has also turned positive
The above graphics can be used to identify whether the price of bitcoin has peaked relative to its true value. Glassnode also features the MVRV oscillator which can be helpful in determining whether the bitcoin market is about to go through a prolonged bearish or bullish period.
In the graphic below, Glassnode also plots the 100-day simple moving average (SMA) of the MVRV ratio. He noted that, historically, the MVRV ratio being above its 100-day SMA has meant that the price of bitcoin is in a bull market, while when the MVRV has been below its 100-day SMA, it usually means that A bear market is happening. ,
In the graphic below, Glassnode improves on the above oscillator by taking the ratio between the MVRV ratio, its 100-day SMA, and then subtracting one. Negative score equals negative momentum in MVRV ratio and vice versa. Transitions from periods of MVRV momentum to negative for a while, such as in 2012, 2015 and 2019 and 2020, have been clear indicators of an upcoming and often prolonged bitcoin bull market.
Meanwhile, a change from a prolonged period of positive MVRV momentum to negative has also historically occurred at the start of prolonged bear markets. As can be seen in the above chart, the momentum of the MVRV ratio just turned positive (i.e. the ratio moved above its 100-day SMA). If history is anything to go by, this is a huge bullish sign for the price of bitcoin.
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