Despite some mid-week turbulence, the price of Bitcoin (BTC) rose to approx.lost ground last week, recording an overall price boost of 4.07%, according to CoinMarketCap data. This positive price performance has allowed BTC to maintain its upward trajectory from last week when it crossed the $60,000 level. However, amidst this price gain, it remains widely uncertain whether the cryptocurrency market leader has now entered an uptrend.
Related reading: Bitcoin bull run begins: Expert points to huge growth potential in coming months
Bitcoin MVRV move key to bull run, analyst says
On Friday, popular cryptocurrency analyst Ali Martinez common a market condition that would signal BTC returning to an upward phase. Over the past two weeks, the main cryptocurrency has gained over 23%, moving from around $52,800 to a peak price of $64,041.
Martinez, however, assumes that bitcoin’s market cap to realized value (MVRV) ratio needs to close above its 90-day moving average to declare an uptrend after weeks of sideways movement in July and August. In general, the MVRV indicator is used to assess the trend in the Bitcoin market. A high indicator indicates a potential overvaluation of the asset, while a low indicator indicates undervaluation.
When Bitcoin’s MVRV indicator falls below its 90-day moving average, i.e. the average MVRV over that period, it indicates that the asset is in a correction or bearish phase and investors are likely to have suffered unrealized losses, which could trigger a negative bias soon. In turn, when the MVRV indicator crosses above its 90-day moving average, it signals a bullish trend and the market value of Bitcoin is rising above historical averages.
Ali Martinez postulates that the latter condition needs to occur to stamp Bitcoin’s bullish transformation despite the recent market gains. If this scenario plays out, BTC could rise to $68,000-$70,000, its next major resistance level. In such a case, the leading cryptocurrency could likely see an overall positive performance in Septembera month known for bearish gains.
Recent $2 Billion BTC Futures Create Potential Risk of Long Squeeze
In other news, Bitcoin traders have opened around $2 billion in futures contracts in the past 48 hours following the asset’s recent price rally. While this development signals a lot of market interest in Bitcoin, it also signals a significant boost in leveraged positions. Ali Martinez States that this situation creates a risk of a long squeeze, i.e. if the price of BTC falls, these traders’ positions could be forcibly liquidated, creating downward pressure on the price of Bitcoin.
At the time of writing, BTC is still trading at $62,875, down 1.59% over the past day. Meanwhile, the asset’s daily trading volume dropped 16.75% to $36.4 billion.
Featured image from The Motley Fool, chart from Tradingview
