Bitcoin posted another impressive price performance last week, rising by 19.16% according to CoinMarketCap data. The cryptocurrency market leader hit a new all-time high of $93,434 on Wednesday, with the odds of achieving a six-figure market price by the end of the year now higher than ever.
Amid the current market euphoria, CryptoQuant analyst Amr Taha shared some thoughts on the market that may indicate an imminent price drop.
Bitcoin enters profit taking zone – should you sell it or sell it?
In a Quick post Amr Taha said on Friday that many investors may be preparing to withdraw their funds as the Bitcoin MVRV ratio reached 2.64. In general, MER is a trading indicator used to measure whether an asset is overvalued or undervalued or to identify market tops or bottoms.
Amr Taha explains that a Bitcoin MVRV ratio above 2 indicates that investors are currently holding significant amounts of unrealized gains and are likely to start taking profits. However, historical data from late 2021 and early 2022 shows that profit taking occurs as the Bitcoin MVRV ratio moves into the 2.5-3.5 range, and is accompanied by significant corrections.
After Bitcoin prices have been on the rise over the past few weeks, an MVRV ratio of 2.64 represents great potential for a major price correction, despite the slight price decline in the past few days. This sentiment is also supported by the asset’s Relative Strength Index (RSI), which remains in the overbought zone.
However, Ama Taha further explains that Bitcoin may sometimes form a major market top only when the MVRV ratio reaches 4. Therefore, at 2.64, the major cryptocurrency may still maintain the current upward price trajectory, if the bullish market momentum continues. The analyst advises that investors keep an eye on the MVRV ratio as a rise towards 3 would indicate the potential for further price gains while a decline to the 1.5-2 range indicates that a local market top is forming.
Short-term bondholders achieved a cap of $30 billion
In addition to Bitcoin’s alarming MVRV ratio, Taha also noted that short holders have now accumulated a realized market capitalization of over $30 billion, a level last observed in March 2024. The CryptoQuant analyst stated that Bitcoin has historically undergone significant corrections in… Prices whenever STH occurs. The maximum realized reached similar levels, indicating another warning to investors of a possible price decline.
At the time of writing, Bitcoin is trading at $91,738 with a 3.97% gain over the past 24 hours. However, the asset’s trading volume decreased by 7.42% and was valued at $80.73 billion.