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Home CRYPTO

Bitcoin Poised for Major Breakout or Major Retracement? (Here is What You Need to Know)

Michael Juanico by Michael Juanico
August 27, 2024
in CRYPTO
Reading Time: 3 mins read
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  • Bitcoin has entered an uncharacteristic period of calm, according to a Glassnode report, with key indicators suggesting the cryptocurrency market is experiencing a rare equilibrium.
  • The MVRV (Market Value to Realized Value) ratio has tested its all-time average value of 1.72, historically marking a transition point between bull and bear market trends.
  • Significant portions of Bitcoin supply held by short-term investors are transitioning to long-term holder status, while speculation in perpetual swaps has reset, potentially impacting future market volatility.

Bitcoin (BTC) has entered an uncharacteristic period of calm, according to a recent analysis by blockchain analytics firm Glassnode. However, there are signs that this equilibrium will not last long.

Bitcoin $BTC has been trading within the same channel for 6 months straight

Are we going up or down from here? pic.twitter.com/nDqcWLKB5q

— BlockNews.com (@blocknewsdotcom) August 27, 2024

MVRV Ratio Points to Transition Period

One of the most telling metrics highlighted in Glassnode’s report is the MVRV (Market Value to Realized Value) ratio. This indicator compares Bitcoin’s current market price to the average price at which coins were last moved, effectively measuring the average profit or loss of all Bitcoin holders.

Over the last two weeks, the MVRV ratio has tested its all-time average value of 1.72. This critical level has historically marked a transition point between a macro bull versus bear market trend.

An MVRV ratio above 1 indicates that the current market value exceeds the realized value, suggesting that the average holder is in profit. Testing the 1.72 level is particularly significant after the excitement surrounding the launch of Bitcoin spot ETFs. This suggests that investor profitability has essentially reset to an equilibrium position.

Investor Activity and Capital Flows Cooling Off

Adding to the intrigue, Glassnode’s report notes a marked cooling in net capital flows into Bitcoin assets. Investors are engaging in only marginal profit and loss-taking activities. The report points out that “89% of days experience a capital inflow larger than today, excluding during loss-dominant bear markets.”

Further complicating the picture, a significant portion of Bitcoin supply held by short-term investors is on the verge of transitioning into long-term holder status. This shift could also impact market swings in the near future.

Derivatives Market Sees Decline in Leveraged Positions

In the derivatives market, speculation in perpetual swaps has experienced a full reset, according to Glassnode. The ratio between price and net liquidation volume volatility is approaching levels not seen since February 2022. This indicates a significant decline in traders’ appetite for leveraged positions.

Typically, this metric returns to a neutral level near inflection points such as a continuation of the trend or a reversal back into a macro scale bearish trend. The report suggests the current calm may precede heightened volatility.

Conclusion

In summary, Bitcoin is experiencing a rare period of equilibrium according to several key market indicators. However, Glassnode’s analysis suggests this calm is unlikely to persist, and volatility may be on the horizon. The cooling of investor enthusiasm and decline of leveraged speculation points to a potential inflection point in the market. Bitcoin traders should brace themselves for a bumpy ride ahead.

Disclaimer: BlockNews provides independent reporting on crypto, blockchain, and digital finance. All content is for informational purposes only and does not constitute financial advice. Readers should do their own research before making investment decisions. Some articles may use AI tools to assist in drafting, but every piece is reviewed and edited by our editorial team of experienced crypto writers and analysts before publication.
Tags: BitcoinBitcoin Spot ETFsBlockchainGlassnode
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Michael Juanico

Michael Juanico

Michael is a BSBA Management graduate from Mindanao State University and has been a professional content writer since 2019. He began exploring cryptocurrency in 2021 and has since made blockchain and digital assets his primary focus. For nearly four years, Michael has contributed research and editorial content at Aiur Labs and BlockNews, producing clear and accessible coverage of market trends, trading strategies, and project developments. He is transparent about his personal holdings in Bitcoin, TRON, and select meme tokens, combining writing expertise with hands-on market experience to deliver trustworthy insights to readers.

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