Bitcoin has been hovering between $60,000 and $70,000 for nearly four months.

This is disappointing, but it is also normal. History tells us that after the Bitcoin halving event, the market often goes through a period of adjustment. Looking back at the halving cycles in 2016 and 2020, it is not difficult to find that the market first went through a period of consolidation before ushering in the so-called "breakout period", that is, the stage of soaring prices. However, we cannot be satisfied with "history is always like this", we need to analyze the current market dynamics in depth to better understand it and even find profit opportunities from it.

"What about other cryptocurrencies? What are the chances of airdrops? What about the progress of the ETH ETF?" These questions are undoubtedly the focus of investors, but in this article, we will focus mainly on Bitcoin.

When we try to answer why there is a large amount of supply on the market when the price of Bitcoin is close to $70,000, some obvious factors may be:

  • A large amount of funds have entered the market in advance of the halving event;

  • Miners have to sell some Bitcoins because their income is halved;

  • Possible US tax factors also affect the supply and demand in the market.

Although these reasons seem reasonable, it is more critical to analyze the market in depth through some objective indicators. Among them, the market value to realized value (MVRV) is an important reference. This indicator reflects the ratio between the weighted average purchase price of Bitcoin (that is, the price at the time of the last transaction) and the current market price, thereby revealing the unrealized profits of Bitcoin.

In March, MVRV reached a peak with a ratio of 2.75. This means that when the price of Bitcoin reached $73,100, its average purchase price was only $26,580. Although this metric may not be accurate in some cases (for example, centralized exchanges may only update database entries without actually moving tokens), it usually rises in sync with market price peaks. This suggests that at some point, investors may choose to take profits and leave.

Another indicator worth watching is the change in the positions of long-term holders. These holders are defined as wallets that have held Bitcoin for more than 155 days. The top of the market often occurs after these long-term holders have finished selling, and the bottom is formed when they start to buy back in. In the data from late January to late March, we can clearly see a surge in selling. However, it is encouraging to see that these long-term holders have also started to buy Bitcoin back in. This gives us an important clue: the growth rate of global M2 (a key factor in global liquidity) has slowed down significantly since late March/early April. Since the market is forward-looking, if the growth outlook for M2 is poor, the market may expect the US dollar to be stronger relative to cryptocurrencies (all else being equal).

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