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Market in check – is the Bitcoin crash coming now? MVRV model signals caution!

4 min read

As everyone in the financial market has now noticed, the crypto market has performed impressively since mid-October 2023. This made many investors euphoric and new investors were also attracted by the huge price increases. The majority of crypto projects, aside from a few lagging altcoins, have generated significant profits for average wallets in the medium to long term, according to analytics firm Santiment. This has led to a situation in which many assets are signaled as ‘overbought’ – a condition that now calls for caution.

In this article you will find out all the details about the further Bitcoin price forecast and how the market for all cryptocurrencies could develop in the coming weeks based on fundamental analysis.

Between profit and risk: This is how things could continue for the crypto market

As the top behavioral analytics platform, Santiment recently noted that many coins in the crypto market have achieved high average profits since the October 2023 boom. This does not necessarily mean that a massive correction is imminent, but historically there is a higher risk in opening new positions during a four-month long uptrend.

As a renowned fundamental analysis indicator for assessing market conditions in cryptocurrencies, the MVRV model currently shows a higher than average risk when opening new positions in the crypto market. Metaphorically speaking, the MVRV (Market Value to Realized Value) metric shows that in the medium to long term many wallets appear ‘overbought’.

While this doesn’t necessarily mean that a massive correction is imminent, it certainly cautions investors to be cautious. Based on fundamental analysis points, it also clearly shows that, even when investors are in the more euphoric and emotional phases, the markets remain cyclical. Those phases of overheating continue to lead to corrections in most cases, although not necessarily significant.

Interpretation of the signals: Opportunities and risks for the further Bitcoin price forecast

The MVRV opportunity and danger zone divergence also shows that crypto traders have lost money on paper in some projects, i.e. altcoins. This could imply a low risk assessment for investments in these projects. On the other hand, traders who have made profits over multiple periods of time are in the danger zone, indicating high risk for investments.

An interesting aspect of the current market dynamics are the so-called ‘Dolphin’ wallets. These mid-sized wallets have emerged as indicators of market turning points and are consistently used by fundamental analysts. These traders are increasingly withdrawing their capital from volatile coins into the safe havens of stablecoins. These recent movements could therefore, of course, be indicative of impending market moves in the larger context and should be monitored by investors to make timely and informed investment decisions.

According to Bloomberg analyst James Seyffart, after an impressive period of capital inflows into crypto ETFs, we recently experienced the first day of net outflows since January 25th. This could indicate a brief respite in the steady growth trend or an early sign of a larger trend reversal. Because the strong purchases by BTC through the vehicle of ETFs have continued consistently since mid-October 2023.

Record volume for Bitcoin ETFs: The first outflows despite record numbers of investments in BTC

The data shows that outflows have occurred from various funds such as the iShares Bitcoin Trust and the Grayscale Bitcoin Trust, which could indicate a change in investor behavior. These outflows could have a variety of reasons, including profit-taking after the recent rally or a reaction to other macroeconomic events.

The trading volumes of Bitcoin-based exchange traded funds (ETFs) had recently reached new highs when viewed cumulatively. With markets still closed on President’s Day in the US, the combined volume of the seven largest ETFs rose to an impressive $6.94 billion. This development not only marks personal records for individual funds such as $FBTC, $BITB, $HODL, $ARKB and $BTCO, but also underscores the increasingly widespread investor interest in cryptocurrencies.

Since Bitcoin ETFs either hold real Bitcoins or are based on futures contracts, they offer every type of investor the opportunity to invest in the price development of Bitcoin. They do not have to deal directly with the purchase, storage and associated security of the cryptocurrency.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.