Bitcoin saw another remarkable price surge last week, rising 19.16% according to CoinMarketCap data. The cryptocurrency market leader set a recent all-time high of $93,434 on Wednesday as the odds of hitting a six-figure market price by the end of the year are now higher than before.
Amid the current market euphoria, CryptoQuant analyst Amr Taha shared some market insights that could indicate an impending price decline.
Bitcoin enters the profit-generating zone – sell or HODL?
In Quick post on Friday, Amr Taha stated that many investors may be preparing to cash out as the Bitcoin MVRV ratio reached 2.64. Generally speaking, market to realized value is a trading ratio used to measure whether an asset is overvalued or undervalued, or to identify peaks or troughs in the market.
Amr Taha explains that a Bitcoin MVRV ratio above 2 indicates that investors currently hold significant amounts of unrealized profits and are likely to start taking profits. However, historical data from tardy 2021 and early 2022 shows that profit-taking occurs when the Bitcoin MVRV moves into the 2.5-3.5 range and is accompanied by significant corrections.
Following the surge in Bitcoin prices over the past few weeks, the MVRV ratio of 2.64 creates significant potential for a major price correction, despite minor price declines over the past few days. These sentiments are additionally supported by the Relative Strength Index (RSI), which remains in the overbought zone.
However, Ama Taha goes on to explain that Bitcoin can sometimes only make a major market top when the MVRV ratio reaches as high as 4. Therefore, at 2.64, the major cryptocurrency could still maintain its current upward price trajectory if the market momentum continues. The analyst recommends investors monitor the MVRV indicator, as an raise towards 3 would signal the potential for further price increases, while a drop to the range of 1.5-2 indicates the formation of a local peak in the market.
Tiny-term holders have met the $30 billion limit
In addition to Bitcoin’s alarming MVRV rate, Taha also noted that short-term holders have now accumulated a realized market capitalization of over $30 billion, which is a level last seen in March 2024. The CryptoQuant analyst stated that Bitcoin has historically undergone significant price corrections every time , when STH realized capitalization reached a similar level, signaling another warning to investors about a potential price decline.
At the time of writing, Bitcoin is trading at $91,738, up 3.97% in the last 24 hours. However, the asset’s trading volume dropped by 7.42% and is valued at $80.73 billion.
