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Recent on-chain data analysis suggests that a Bitcoin metric has reached levels historically associated with corrections in the cryptocurrency's price.
According to Maartunn, the Netherlands community manager for CryptoQuant, the BTC price is currently 40% above the cost basis of short-term holders.
Understanding the MVRV Ratio
The realized cap is a capitalization model that assumes the actual value of any circulating coin isn't equal to the current spot price but rather the price at its last transaction on the blockchain.
In this context, attention is drawn to a specific segment of the market: short-term holders (STHs), comprising investors who acquired their coins within the past 155 days. The MVRV ratio of STHs indicates the profits or losses held by these investors.
Recent Data Trends
Analysis reveals that the Bitcoin STH MVRV has remained above 1 for some time, indicating net profits for STHs. However, with the recent surge in Bitcoin's price, this indicator has surged to exceptionally high levels, with the BTC spot price now standing 40% over the STHs' average cost basis.
According to CNBC, Bitcoin charts indicate a trajectory toward new highs yet also suggest the possibility of further steep corrections.
A News BTC report says that such elevated levels of the MVRV ratio have preceded corrections in the asset's price. While this doesn't guarantee an immediate correction, the historical pattern suggests a possibility of one occurring.
Potential Factors Behind the Pattern
This pattern could stem from Bitcoin investors being more inclined to engage in profit-taking as their profits increase.
With Bitcoin's price experiencing significant volatility following its recent all-time high above $69,000, currently trading around $67,700, the market remains closely monitored for potential sentiment and price dynamics shifts.
Photo: Joshua Woroniecki/Unsplash
