Metric analysis

On-chain Bitcoin metric suggests 2017-style bull run will continue

Bitcoin’s (BTC) pullback from its all-time high of $ 67,000 to below $ 60,000 hasn’t deterred bulls from aiming for yet another all-time high, according to indicator that tries to predict market lows and highs .

Dubbed MVRV, the risk metric represents the ratio of Bitcoin’s market value to its realized value, similar to the price-to-book ratio (P / B) which compares a company’s market value to its book value. In doing so, MVRV attempts to identify whether an asset is under or overvalued.

A 2017-type bullish configuration

An MVRV reading above 3.7 alerts on Bitcoin’s overshoot, causing massive sell-off. On the flip side, an MVRV reading below 1 implies buying pressure on the outlook for Bitcoin’s lows.

MVRV has historically helped Bitcoin traders spot the selling and buying pressures in the Bitcoin market. For example, the orange overlays in the graph below represent the correlation between the price of Bitcoin and its MVRV output.

Bitcoin price compared to MVRV. Source: CryptoQuant

Lennard Neo, head of research, explained in a new Stack Funds report released on November 4 that the current MVRV rebound is similar to that seen in the 2017 bull run, forming a streak of higher highs and lows. (green) like the Bitcoin price rises.

Additionally, the MVRV also rebounded similarly after the May 2021 price crash, dropping below 1 to indicate the undervaluation of the Bitcoin market during this time frame. The metric has recovered well to create higher highs and lows, confirming the uptrend for Bitcoin.

“With the MVRV currently trading at 2.72, a far cry from its recent high of 3.96 in February, we expect further room for growth as it tests handle 4.0 again,” Neo wrote in a report released on November 4, adding:

“If the uptrend in MVRV were to occur in the near future, Bitcoin’s peak is likely in some time.”

Bitcoin at $ 70K?

Neo added that Bitcoin’s recent ability to hold $ 60,000, as its support level indicates its strong willingness to retest $ 67,000 – or even extend the rise to $ 70,000.

The analyst mentioned two chain measures in addition to the MVRV to explain his bullish outlook. This included metrics that track Bitcoin balances on all crypto exchanges and wallets with a large amount of BTC tokens.

In detail, the total Bitcoin held by stock exchanges around the world reached 2.311 million BTC, its lowest level in more than three years.

Bitcoin balances on all exchange reserves. Source: CryptoQuant

Bigger Bitcoin investors also stepped up their accumulation frenzy as the price of Bitcoin recovered from its May-July 2021 crash.

According to Glassnode’s Whale Supply Shock indicator, the so-called whales – addresses that contain between 10,000 and 100,000 BTC – increased their Bitcoin purchases during the recovery to less than $ 30,000 after July.

Bitcoin Whale Supply Shock. Source: Glassnode

Dor Shahar, Chain Analyst at CryptoJungle, called this is a sign of a “multi-month accumulation bullish trend,” predicting new highs for Bitcoin as whales remove more BTC from circulation.

Related: Bitcoin Whale Indicator Detects Multi-Month Accumulation Trend As BTC Consideres New $ 67,000 Test

“The ratio between the two groups, whales and other fish, gives a measure of the dynamics of supply,” he said, adding:

“Thereby, [the indicator] can help visualize the coin shortage held by whales and its effect on the price. Along with that, a more sensitive macro peak indication. “

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