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Bitcoin's latest price drop below $60,000 has raised questions about whether the asset will end its remarkable bull market earlier than expected this year.
However, James Check, Chief Analyst at Glassnode, suggests that bullish investors have little to worry about.
Bitcoin's Pullback: Minor Dip or Catastrophic Plunge?
In a video analysis released on Friday, Check reviewed various on-chain metrics concerning short-term Bitcoin holders who purchased their Bitcoin five months ago for the first time.
Firstly, the Short-Term Holder Market Value to Realized Value (MVRV) ratio for Bitcoin is now approaching 1.0 again, indicating that unrealized profits and losses have reached a breakeven point. While this level can serve as support after a bull market correction, it may also become a major resistance during bear markets when most Bitcoin holders are in a loss-making position.
Check said, "Minor dips are good. We've had a few of these retests in 2023. If we believe this is an elastic uptrend, we should expect the cost basis of short-term holders to sustain in the $58,000 to $59,000 range."
Similarly, the Spend Output Profit Ratio (SOPR) for short-term holders recently dropped below 1.0, indicating that short-term holders are now realizing more losses than profits. If SOPR significantly falls below this level without rebounding, it could be a signal for an ongoing bear market in the future.
As of this week, the realized losses for short-term holders have significantly increased, suggesting panic-driven sell-offs by new buyers amid escalating tensions between Iran and Israel.
Check added, "This is essentially what you want to see as a contrarian investor. As a contrarian investor, you kind of hope to see people doing the wrong thing at the wrong time."
A few days ago, Check pointed out that if Bitcoin's price drops below $58,800, its price could become 'top-heavy.' At the time of writing, the asset's trading price is $64,000.
Bitcoin's Long-Term Momentum
Other indicators, such as the AVIV Momentum Indicator, suggest that Bitcoin's price momentum remains positive over longer time frames, experiencing only a "proper reset" over a 30-day period to cool off.
Regarding the Bitcoin halving itself, Check believes that its financial impact may be overly hyped. The amount of BTC issued daily to miners is only a small portion of the market compared to Bitcoin futures trading volume, spot trading volume, and ETF trading volume.
He said, "The scale of the halving is now more of a narrative game than a consideration of actualities." |
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Post time 29-4-2024 20:56:57