In the ever-volatile world of cryptocurrency, cautionary voices are sounding alarms amidst the weakening optimism. According to a recent tweet by CryptoQuant analyst ‘Bitcoin Lupin,’ the market is showing signs of overheating. Bitcoin ($BTC) MVRV (Market Value to Realized Value) ratio is reaching 2.23. This metric, which measures the market’s valuation compared to the average on-chain purchase price, suggests that another correction of around -20% could be looming on the horizon.
Why Should You Be Cautious? feat. MVRV
“The market is still at an MVRV level of 2.23, which is more than double the average on-chain purchase price. If a similar pattern to the past occurs, a correction of around -20% is possible.” – By @bitcoin_lupin
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— CryptoQuant.com (@cryptoquant_com) April 16, 2024
… Remember that BTC is already down 17% from $73k currently trading between $62k-$63. Another 20% decline will take it to $50k. This is a more worrying sign for altcoin traders because if this comes true, altcoins will bleed extensively as witnessed during this weekend when BTC fell 5% while altcoins lost up to 30% of their value.
Bitcoin Recovery Phase and Its Implications for the Market
The concept of the recovery phase in cryptocurrency markets is akin to a warm-up before the main event. As per the analyst, this typically signals the onset of a bull market. However, this time around, the recovery phase has been particularly intense. The market is resolving its overheating through prolonged consolidation rather than swift price corrections.
In the past, when the recovery phase shifted to a full-fledged bull market, it happened around the time the MVRV ratio reached the middle of the Bollinger Bands or matched the average level of the four-year cycle. Currently, the MVRV ratio stands at 2.23, indicating a level of enthusiasm that surpasses the norm. If historical patterns repeat themselves, a correction of approximately -20% could be on the cards.
Factors Influencing Bitcoin’s Future Trajectory
Despite Bitcoin’s recent surge to $70k marking a new all-time high (ATH) being viewed as a milestone, it aligns with expectations considering the rapid ascent witnessed during this recovery phase. However, uncertainties loom on the horizon due to the outflows of ETFs, unexpected fluctuations in interest rates, geopolitical tensions (Iran vs. Israel), and adjustments in market dynamics.
While CryptoQuant’s Bitcoin Lupin’s analysis serves as a call to preparedness for potential market movements. As investors navigate through these uncertain waters, a cautious approach coupled with a keen eye on market indicators could prove instrumental in weathering any forthcoming storms.
