Bitcoin trades in ‘enthusiastic’ phase as data hints at upcoming range expansion
2024.07.03 17:52
Bitcoin (BTC) price continued to slump on June 3 and now trades 20% below its all-time high of $73,835. The current price action reflects the “apathy and boredom” that dominate the market, but onchain metrics hint that Bitcoin is prepping for a “larger move” in the near future, according to a Glassnode report.
Bitcoin investor profitability remains “remarkably robust”
Bitcoin price has had an impressive run so far in 2024, with the flagship cryptocurrency breaching its all-time high on March 5. Bitcoin has since corrected, dropping below the $60,000 level thrice over the last ten days, leading to “fear and bearish” sentiments as apathy took over.
Despite this, the Market Value Realized Value (MVRV) metric reveals that a significant proportion of Bitcoin investors remain in profit, as noted by market intelligence firm Glassnode.
The chart below shows that the aggregate investor profitability remains remarkably high, with the average coin still holding a two-time profit multiple.
Glassnode analysts wrote,
“This is a level that often delineates the ‘Enthusiastic’ and the ‘Euphoric’ bull market phases.”
Bitcoin MVRV ratio. Source: Glassnode
Glassnode explained that Bitcoin’s accumulation between the $60,000 and $70,000 range since March has led to widespread indecision and a market that has failed to establish a robust trend in either direction.
According to the data aggregator, when the spot price oscillates between the all-time high and the True Market Mean, it suggests an “enthusiastic bull market.” According to the chart below, the True Market Mean is valued at $50,000, representing the average cost basis per active investor.
“At the moment, prices remain within the Enthusiastic bull regime after a few very brief excursions into the Euphoric zone.”
Bitcoin True-market Mean. Source: Glassnode
Glassnode says that $50,000 is a key pricing level for Bitcoin’s price to remain above “if the macro bull market is expected to continue.”
A new report by 10X Research suggests that if Bitcoin fails to remain above $60,000, it will rapidly descend to lower support levels, potentially reaching as low as $50,000.
“Psychologically, breaking the 60,000 Bitcoin price would be damaging, as prices could drop quickly to the nearest support level, which might be $55,000 or even $50,000.”
Compressing volatility signals ‘large market moves ahead’
After several months of range-bound price action, Glassnode analysts noted a decline in volatility across multiple time frames. Bitcoin’s Realized Volatility across 1-week, 2-week, 1-month, 3-month, 6-month and 1-year timeframes exhibits negative 30-day change.
The report says that when this happens, “a signal is triggered, inferring that volatility is compressing, and so are investor expectations of lower volatility ahead.”
Bitcoin volatility measure. Source: Glassnode
Volatility compression is a period that marks a decline in historical volatility or fluctuation in Bitcoin price performance. It is often followed by a significant market movement, whether upward or downward.
Gassnode also assessed the percent range between the highest and lowest price ticks over the last 60 days and found that Bitcoin’s market volatility continues to “compress to levels rarely seen.”
If this compression happens after such lengthy consolidations, it usually means that the price is readying for “large market moves.”
Regarding the Sell-Side Risk Ratio, the analysts assessed the absolute sum of realized profit and loss locked in by investors relative to the asset size – the Realised Cap– and found that this metric has contracted to historic lows.
“This suggests that a degree of equilibrium has been established during this price consolidation and alludes to heightened volatility expectations in the near future.”
Bitcoin short-term holder sell-side risk ratio. Source: Glassnode
This means that the current trading range is in the “later stages of developing toward the next range expansion.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
