Bitcoin price might drop further based on these on-chain metrics
|- Bitcoin price dipped to $26,000 last week, which triggered true pessimism in investors as “buy the dip” mentions died down.
- The MVRV ratio highlights that while short-term traders are observing losses, long-term traders are still profitable.
- The Net Unrealized Profit/Loss indicator backs the sentiment of Fear being observed in investors, which has resulted in the most shorts open on exchanges in three months.
Bitcoin price witnessed a severe drawdown this past week that led to the crypto market noting billions in liquidations. Since then, the general investor sentiment has turned negative, which is a good sign for the cryptocurrency as it ascertains the market is ready for a bullish reversal.
Bitcoin shorts remain open despite hints of recovery
Bitcoin price hit a low of $26,000 last week, and since the crypto market is primarily driven by investors’ sentiment, it is critical to observe the shift in order to gain an idea of what lies ahead. According to Santient’s analysis, at present, the market is observing a lack of “buy the dip” mentions, which confirms a bearish sentiment in investors.
Crypto market “buy the dip” mentions
When the pessimism across all four social platforms aligns and settles back down to neutral mentions of buying the dip, this is when the actual opportunity historically presents itself for patient traders.
However, there is still a while before this sentiment initiates a recovery rally for Bitcoin since there are some investors still observing profits. The 30-day average of the Market Value to Realized Value (MVRV) ratio is currently exhibiting a -8.5% return, while the 365-day average is still observing profits of 5.2%. Once both short and long-term investors note losses akin to March this year, Bitcoin would be open to a recovery rally.
Bitcoin MVRV ratio
This would be validated if Bitcoin price was to decline further, which the market is seemingly still expecting. Exchanges are observing large amounts of short contracts still open, marking a three-month high in terms of volume.
Bitcoin short contracts
This bearish sentiment is backed by the Net Unrealized Profit/Loss indicator as well, which suggests that investors are currently experiencing Fear owing to the recent crash.
Bitcoin NUPL
If the short traders’ bet is successful, this Fear would extend considerably. However, according to Santiment,
“More often than not, there can be a rise to scare away the shorts and neutralize funding rates the longer traders try to profitably bet against markets.
Bitcoin, altcoins, stablecoins FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
What are altcoins?
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are stablecoins?
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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