In summary
- Bitcoin (BTC) has entered an uncharacteristic period of calm, according to a recent analysis from Blockchain analytics firm Glassnode.
- Key indicators suggest that the Cryptocurrency market is experiencing a rare equilibrium, which may not last.
- The MVRV (Market Value to Realized Value) ratio has reached its historical average value of 1.72, suggesting a transition point between a bullish and bearish macro trend in the market.
Bitcoin (BTC) has entered an uncharacteristic period of calm, according to a recent analysis, but there are signs of an impending wave of volatility.
According to the latest weekly report from blockchain analytics firm Glassnode, key indicators suggest that the cryptocurrency market is experiencing a rare equilibrium, and it might not last.
“Historically, periods of quiet and calm market structure are short-lived, and often precede an expectation of increased volatility,” the report said.
One of the most telling indicators highlighted in the report is the MVRV (Market Value to Realized Value) ratio. This indicator compares the current market price of Bitcoin to the average price at which the coins last moved, effectively measuring the average gain or loss of all Bitcoin holders.
“Over the past two weeks, the MVRV ratio has tested its historical average value of 1.72,” the report states. “This critical level has historically marked a transition point between a bullish versus bearish macro trend in the market.”
It is important to note that an MVRV ratio above 1 indicates that the current market value exceeds the realized value, suggesting that the average holder is in profit. Conversely, a ratio below 1 implies that the average holder is in loss. The current test of the 1.72 level is particularly significant following the excitement surrounding the launch of Bitcoin spot ETFs.
“This suggests that investor profitability has essentially returned to a balanced position and the excitement and euphoria following the ETF launch has completely cooled off,” according to Glassnode.
Image: Glassnode
Adding further intrigue, the report notes a marked cooling in net capital flows into Bitcoin assets, with investors engaging in only marginal profit-and-loss activities. Glassnode notes that “89% of days see a larger capital inflow than today, excluding loss-dominated bear markets.”
Furthermore, a significant portion of the Bitcoin supply held by short-term investors is on the verge of transitioning to long-term holder status, having been held for at least 155 days, a shift that could also impact market ups and downs in the near future.
Image: Glassnode
In the derivatives market, speculation in perpetual swaps has seen a complete reset, according to Glassnode. The ratio of price to net settlement volume volatility is approaching levels not seen since February 2022, indicating a significant decline in traders’ appetite for leveraged positions.
“Typically, this metric returns to a neutral level near turning points such as trend continuation or a reversal to a macro-scale downtrend,” the report said.
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