Despite mid-week volatility, Bitcoin (BTC) managed to close the past week with a 4.07% gain, according to CoinMarketCap. This uptick helped Bitcoin maintain its upward trajectory, crossing the $60,000 mark. However, uncertainty persists over whether this marks the beginning of a sustained bullish trend.
MVRV Ratio: Key to Bitcoin’s Bull Run?
Crypto analyst Ali Martinez highlighted a critical market condition that could signal a return to a bullish phase for Bitcoin. Over the last two weeks, BTC has surged by more than 23%, moving from around $52,800 to a peak of $64,041. Martinez emphasized that Bitcoin’s Market Value to Realized Value (MVRV) ratio needs to close above its 90-day moving average to confirm a bullish trend.
The MVRV ratio is used to gauge market trends; a high ratio suggests potential overvaluation, while a low ratio points to undervaluation. If Bitcoin’s MVRV dips below its 90-day moving average, it typically signals a bearish phase, indicating that investors might hold unrealized losses and possibly foster negative sentiment. Conversely, if the MVRV moves above this average, it indicates bullish momentum, suggesting that Bitcoin’s market value is rising above historical averages.
Martinez asserts that for Bitcoin to confirm its bullish transition, its MVRV must surpass the 90-day moving average. Should this occur, BTC could potentially surge to its next resistance level, estimated between $68,000 and $70,000. Achieving this could set Bitcoin on a path to end September on a positive note, which is historically a bearish month.
$2 Billion BTC Futures Contracts: Potential for a Long Squeeze
In recent developments, traders have opened about $2 billion in Bitcoin futures contracts over the last 48 hours, following the asset’s price surge. This surge in market interest also signals a rise in leveraged positions. Ali Martinez warns of the potential risk of a long squeeze: if Bitcoin’s price drops, these traders may face forced liquidations, potentially leading to downward pressure on the cryptocurrency.
As of now, BTC is trading at $62,875, reflecting a 1.59% loss in the past 24 hours. Additionally, the daily trading volume has decreased by 16.75% to $36.4 billion.
In summary, while Bitcoin’s recent price rally has raised hopes for a new bullish phase, key market indicators like the MVRV ratio suggest that caution is necessary. The recent surge in futures contracts introduces the risk of a long squeeze, which could impact Bitcoin’s price if market conditions change.
