Bitcoin price started Friday, August 16, below the $57,000 level, after a sudden 7% drop on Thursday. While the major cryptocurrency is showing good signs of recovery, a prominent cryptocurrency analyst explained how the recent price drop could have pushed BTC price into a bearish phase.
Bitcoin MVRV Falls Below 1-Year SMA – Impact on Price?
In a post on Platform X, popular cryptocurrency analyst Ali Martinez common that Bitcoin price has experienced a change in its cycle after the recent price drop. This on-chain revelation is based on the Momentum Glassnode MVRV (Market Value to Realized Value) indicator, which serves as a tool for identifying macroeconomic trends.
The MVRV Momentum Indicator is primarily comprised of the MVRV Ratio and the 1-year Straightforward Moving Average (SMA). When the MVRV Ratio breaks above the SMA, it signals a bull market. Meanwhile, a break below the 1-year Straightforward Moving Average signals a bear market.
Typically, mighty breakouts above the 1-year MVRV SMA suggest that gigantic volumes of Bitcoin have been acquired below the current price, showing that holders are now in the upside. On the other hand, when there is a mighty breakout below the moving average, it indicates that gigantic volumes of BTC have been acquired above the current price, and holders are in the downside.
A chart showing the Bitcoin price and the MVRV momentum indicator | Source: Ali_charts/X
According to Martinez, the BTC cycle has turned bearish after Bitcoin price fell below $61,500. This recent significant breakout of the MVRV indicator below the SMA shows that a significant amount of BTC has been acquired above $61,500. However, these coins are now in a loss, which could potentially lead to a gigantic distribution by investors looking to limit their losses.
When a gigantic number of investors are in the red, selling pressure increases, which can put further downward pressure on Bitcoin’s price. Ultimately, this could lead to a situation where falling prices trigger a larger sell-off of the asset, reinforcing the bear phase dynamics.
Bitcoin price in brief
At the time of writing, Bitcoin is still trading around $59,000, up 2.5% in the past 24 hours. However, the major cryptocurrency is down almost 3% for the week, according to data from CoinGecko.
The price of Bitcoin hovers around the $59,000 level on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
