Bitcoin’s (BTC) pullback from its all-time high of $ 67,000 to below $ 60,000 hasn’t deterred bulls from seeking another high in the future, according to an indicator trying 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 hit a bottom.
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.
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) while the price of Bitcoin goes up.
What’s more, MVRV also rebounded similarly 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 $ 70,000?
Neo added that Bitcoin’s recent ability to sustain the $ 60,000 level 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.
Specifically, Total Bitcoin held by exchanges around the world reached 2.311 billion BTC, its lowest level in more than three years.
The largest Bitcoin investors also accelerated their accumulation trend as the price of Bitcoin rebounded from its May-July 2021 slide.
According to Glassnode’s Whale Supply Shock indicator, so-called whales, addresses that are between 10,000 and 100,000 BTC, increased their purchases of Bitcoin during the recovery of less than $ 30,000 after July.
Dor Shahar, an on-chain analyst at CryptoJungle, rated as a sign of “a multi-month accumulation uptrend”, predicting new all-time peaks for Bitcoin as the whales remove more supply of out-of-circulation BTC.
“The relationship between the two groups, whales and other fish, gives a measure of the dynamics of the supply,” he said, adding:
“Therefore, [el indicador] 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. “
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