Recently, the Bitcoin price faced a sudden 7% drop to below $57,000, raising concerns about a potential bearish phase. A crypto analyst has analyzed the situation, shedding light on the impact of the MVRV ratio on Bitcoin’s market cycle.
Bitcoin MVRV and its Influence on Price Movements
The MVRV Momentum indicator, which includes the MVRV ratio and a one-year SMA, is vital for gauging market trends. An increase in the MVRV ratio above the SMA signifies a shift to a bullish market, while a drop below the SMA indicates a bearish trend.
When the MVRV ratio surpasses the one-year SMA, it suggests that major amounts of Bitcoin were bought at lower prices, implying profit for holders. Conversely, a dip below the moving average indicates that substantial BTC volumes were acquired at higher prices, resulting in losses for holders.
According to analyst Ali Martinez, the recent decline in Bitcoin’s price below $61,500 marks a shift to a bearish phase. The significant break of the MVRV ratio below the SMA indicates that a considerable amount of BTC was purchased above $61,500, leading to potential distribution by investors looking to mitigate losses.
When a large number of investors face losses, the pressure to sell escalates, potentially driving Bitcoin prices down further. This cycle of falling prices triggering more selling reinforces the momentum of the bearish phase.
Current Status of Bitcoin Price
Presently, Bitcoin is trading around $59,000, witnessing a 2.5% increase in the last 24 hours. However, the cryptocurrency has fallen by nearly 3% over the week, as reported by CoinGecko.
