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Bitcoin price shows bearish signs as MVRV ratio dips below key level

Bitcoin price shows bearish signs as MVRV ratio dips below key level

GrafaGrafa2024/08/19 06:45
By:Mahathir Bayena

Bitcoin (CRYPTO:BTC) recently experienced a significant price drop, falling by 7% on Thursday, August 16, and slipping below the $57,000 mark.

Although there has been a slight recovery, with Bitcoin hovering around $59,000, concerns have emerged about the potential for a bearish phase.

This outlook is based on the Market Value to Realized Value (MVRV) Momentum indicator, a tool used by analysts to identify broader market trends.

The MVRV Momentum indicator includes the MVRV ratio and the 1-year simple moving average (SMA).

A break above the 1-year SMA usually signals the start of a bull market, indicating that the market is gaining strength.

Conversely, a break below the SMA often signals a shift into a bearish phase, suggesting that market sentiment is weakening.

In this case, Bitcoin’s MVRV ratio has fallen below the 1-year SMA, which indicates that a significant amount of Bitcoin was purchased at prices above the current $61,500 level.

According to crypto analyst Ali Martinez, this shift below the SMA is a concerning sign, as it suggests that many investors are now holding Bitcoin at a loss.

When investors find themselves in a losing position, there is often an increased pressure to sell in an attempt to cut losses.

This selling pressure can create a feedback loop, where falling prices lead to more selling, further driving down the price of Bitcoin.

The potential for increased selling due to the MVRV ratio dropping below the SMA raises concerns about the sustainability of Bitcoin’s current price level.

If the bearish momentum continues, Bitcoin could face additional downward pressure, leading to a deeper correction.

Investors are now closely monitoring the situation, looking for signs of either stabilization or further declines in the market.

While Bitcoin has shown some resilience, the recent drop in the MVRV ratio below the 1-year SMA is a critical signal that may indicate a prolonged bearish phase.

The market’s response in the coming days will be crucial in determining Bitcoin’s near-term direction.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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