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22/08/24
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Bitcoin MVRV Ratio Faces Death Cross: Signals of Potential Bearish Trend Ahead
Recent on-chain analytics indicate that the Bitcoin Market Value to Realized Value (MVRV) Ratio may be approaching a concerning technical formation known as a death cross. This widely-recognized metric tracks the relationship between bitcoin holders’ investments—quantified as the realized cap—and the market capitalization of Bitcoin.
When the MVRV Ratio exceeds 1, it signifies that investors are collectively enjoying a net profit. Conversely, a value below 1 indicates broader market losses. A ratio of exactly 1 suggests that holders are simply breaking even, maintaining the same value as their initial investments.
In recent months, the MVRV Ratio rose significantly, peaking in March, coinciding with a surge in Bitcoin’s price that marked a new all-time high. Since then, widespread profit-taking during an extended consolidation phase has led to a decline in this ratio, which currently stands at 1.88. This value suggests that the market cap is nearly double the realized cap, indicating that investors are still in a relatively comfortable position.
However, the rate of decline in the MVRV Ratio raises red flags. The 30-day moving average (MA) has experienced a steep decrease and is currently retesting the 365-day MA. Historically, when the 30-day MA falls below the 365-day MA, it has often signaled the onset of a bearish trend for Bitcoin. The last occurrence of this death cross was at the end of 2021, foreshadowing the subsequent bear market of 2022.
As it stands, the potential confirmation of this death cross remains undecided. Investors should closely monitor the indicator in the coming days. If the downward trend of the 30-day MA continues and crosses below the 365-day MA, Bitcoin could be poised for a challenging bear market ahead. Alternatively, a reversal could prevent this technical pattern from manifesting altogether.
In terms of price action, Bitcoin briefly surpassed the $61,000 mark recently but has since retraced to around $59,400, indicating that the initial momentum may not be sustainable.
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