Research is warning that Bitcoin (BTC) could face a “market correction” if BTC price action goes well above $33,000.
In the latest edition of its weekly newsletter, The Week On-Chain, analytics firm Glassnode hinted at the upcoming speculative selling risk.
Bitcoin speculators gain an average of 12%
Bitcoin Short-Term Holders (STHs) – the more speculative BTC investors – have returned to the spotlight this year.
Recently, their total cost base appeared to form broader BTC price support near $26,000. The opposite effect could soon materialize for Glassnode, which has been observing the importance of the cost basis for the past few weeks.
Reporting on short-term and long-term holder (LTH) activity, the researchers highlighted the levels at which speculators should take profits galore.
It used the Market Value to Realized Value (MVRV) metric, which divides the spot value of the coins by the price they last moved at. The resulting number, which is a measure of profitability or loss, will fluctuate around one, which is a “breakeven” price.
“We can also see a strong reaction in the Short-Term Holder MVRV indicator, which reacts strongly from the MVRV=1 break-even level,” explains The Week On-Chain.
“This ratio currently stands at 1.12, suggesting that the cohort of short-term holders is generating a 12% gain on average.”
Should BTC price continue to rise, STH-MVRV will rise as well, and once it crosses 1.2, the threat of profit-taking becomes historically real.
“The risk of market corrections tends to increase when this metric crosses levels between 1.2 (~$33.2K) and 1.4 (~$38.7K) as investors realize ever larger unrealized gains,” Glassnode added.
MVRV chart for short-term Bitcoin holders (screenshot). Source: Glassnode
$25,000 Means “Seller Exhaustion”
More data supports the notion that recent lows near the $25,000 mark have scared off those looking to sell.
Related: BTC Price Up, Fundamentals Down? 5 things to know about Bitcoin this week
The Spent Output Profit Ratio (SOPR), which examines the relative profitability of on-chain BTC movement, has repeatedly demonstrated what Glassnode calls “exhaustion” for sellers at or near this level.
Since the end of 2022, the exhaustion rate has been increasing after bitcoin touched current multi-year lows in the wake of the FTX exchange debacle.
“Over the past few weeks, we have seen multiple spot seller exhaustion below the lower band, including the recent bottom of $25.1k before rebounding back above $30k,” summarized Glassnode along with a related chart .
Bitcoin Spend Output Profit Ratio (SOPR) data (screenshot). Source: Glassnode
Magazine: Gary Gensler’s Job in Jeopardy, BlackRock’s First Spot Bitcoin ETF and Other News: Hodler’s Digest, 11-17 May June
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risk and readers should do their own research in making their decision.
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