Bitcoin MVRV Hits Critical Threshold For Profit Taking – What Does This Mean?
Bitcoin has had another stellar performance over the past week, rising 19.16%, according to CoinMarketCap. The cryptocurrency market leader hit a new all-time high of $93,434 on Wednesday as the likelihood of achieving a six-digit market price by the end of the year became higher than before.
Amid the current market euphoria, CryptoQuant analyst Amr Taha has shared some market insights that may indicate an imminent price drop.
Bitcoin Enters Profit-Taking Zone – Sell or Hold?
in a Quick release On Friday, Amr Taha said that with Bitcoin’s MVRV ratio reaching 2.64, many investors may be preparing to cash out. Generally speaking, Market Value to Realized Value is a trading indicator used to measure whether an asset is overvalued or undervalued, or to identify market tops or bottoms.
Amr Taha explains Bitcoin MVRV Ratio 2 above indicates that investors are currently holding a large amount of unrealized gains and may begin to take profits. However, historical data from late 2021 and early 2022 shows that when the Bitcoin MVRV ratio enters the 2.5-3.5 range, profit-taking occurs, accompanied by a sharp correction.
After Bitcoin’s price surge over the past few weeks, the MVRV ratio of 2.64 presents significant potential for a major price correction, despite a slight price decline over the past few days. This sentiment is further supported by the asset’s relative strength index (RSI), which remains in overbought territory.
However, Ama Taha further explained that Bitcoin may sometimes only form a major market top when the MVRV ratio reaches 4. Therefore, if the bullish market momentum continues, the major cryptocurrency may still maintain its current price upward trajectory at the 2.64 level. Analysts advise investors to keep an eye on the MVRV ratio, as a rise to 3 would signal the potential for further price gains, while a fall to the 1.5-2 range would suggest a local market top is forming.
Short-term holders have achieved a cap of $30 billion
In addition to Bitcoin’s astounding MVRV ratio, Taha noted that short-term holders currently have a realized market capitalization of over $30 billion, a level last observed in March 2024. The CryptoQuant analyst said that historically whenever STH has experienced volatility, Bitcoin has experienced significant price corrections. The realized cap reached a similar level, which warned investors of potential price declines.
At the time of writing, Bitcoin is trading at $91,738, up 3.97% in the past 24 hours. However, the asset’s trading volume fell by 7.42%, valuing it at $80.73 billion.
