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Historical data from the on-chain indicator may suggest that the $24,400 level could be the main support level for Bitcoin right now.
Bitcoin STH MVRV Will Reach 1.0 If Price Declines To $24,400
According to Glassnode’s release of this week’s report, the 1.0 bitcoin STH MVRV level was the market’s support point during an uptrend in the past. “STH” here refers to the “short-term holder group,” which is a Bitcoin cohort that includes all investors who hold their coins less than 155 days ago.
Market Value to Realized Value (MVRV) is a metric that measures the ratio between Bitcoin’s market capitalization and its realized capitalization. The “realized cap” here is a BTC capitalization model that aims to determine the “real” value of an asset by assuming that the value of each coin in circulation is not the current price, but the price at which it last moved on the exchange. blockchain.
Since realized capitalization takes into account the price at which investors bought (this is the price at which their coins were last moved), comparing it to market capitalization (i.e. the current price) can tell us the degree of profitability or loss among the overall market.
When MVRV is greater than 1, it means that the average investor is holding unrealized profits from their BTC right now. On the other hand, values below this threshold mean that the market as a whole is currently incurring some amount of unrealized losses.
Now “STH MVRV”, the actual interest metric in the current discussion, naturally measures the value of the ratio specifically for coins held by short-term Bitcoin holders.
The chart below shows the 7-day average of this metric over the past few years:
The 7-day average of the metric appears to have been above the 1.0 level in recent months | Source: The Week Onchain by Glassnode – Week 18, 2023
On the chart, Glassnode noted the 7-day average bitcoin STH MVRV lines that have been associated with the price of the cryptocurrency over the past few years.
It seems that short-term corrections for the asset as a whole became more likely when this indicator crossed the value of 1.2. At this level, STH hold an unrealized profit of 20%.
The recent drawdown of the price of the cryptocurrency from $30,000 also occurred when the price was above this level. To be more specific, the indicator had a value of 1.33 when the asset was rejected, meaning that STH made a 33% profit.
The reason that this cohort’s high MVRVs generally make a price decline more likely is that the higher the amount of profit STH hold, the more likely they are to sell and collect their profits.
It can be seen from the chart that the analytical firm also noted the relevance of the 1.0 level (that is, the threshold line between profit and loss) for the cryptocurrency. Interestingly, this level usually provides price support during uptrend periods.
A likely explanation for this trend is that the 1.0 level serves as the basis for the value of the majority of STH in the market, so when the price reaches this mark, these investors see this point as a profitable area to accumulate more of the asset. Obviously, this behavior is only observed during rally as holders will only see fit to buy more if they believe the price could rise.
Since the market is right now, the price has to drop to $24,400 to reach this 1.0 level. This means that if Bitcoin finds a deep drop in the near future, $24,400 could be a level that could provide support given the pattern that has held up over the past few years.
At the time of writing, Bitcoin is trading around $28,500, down 1% over the past week.
Looks like BTC has been experiencing some volatility lately | Source: BTCUSD on TradingView