Key indicator suggests the worst is yet to come for Bitcoin as it gets closer to capitulation

  • Bitcoin investors seem to be holding tokens significantly below their acquisition cost, pointing to a bearish trend. 
  • Scott Minerd of Guggenheim Investments holds a pessimistic outlook, expecting BTC to drop further. 
  • Capitulations are tough to identify and have led to historic realized losses in Bitcoin.

Bitcoin is trading at a price further away from the average price at which coins moved on the network. The recent price action hints at a bearish trend typically aligned with capitulation events. Institutional investors are wary, suggesting BTC may drop further. 

Bitcoin heads toward capitulation

Bitcoin short-term holder market value to realized value (STH-MVRV) is an indicator that removes the long-term trends from the asset's fair value. Fair value or MVRV is calculated as an asset's market capitalization divided by realized capitalization. This indicator represents a more accurate take on a short-term overvaluation and undervaluation of Bitcoin than fair value

Notoriously accurate in confirming bull and bear markets ahead of other indicators, STH-MVRV oscillates closely around 1. Historically, the 1-line of the indicator has worked as a resistance/support line. Very low values indicate short-term holders are holding coins significantly below their acquisition cost. 

During a bearish trend, this is aligned with capitulation. The value has dropped significantly; it is currently in the STH Holding Losses zone, confirming that Bitcoin is likely heading toward capitulation day. 

Bitcoin Short Term Holder MVRV

Bitcoin: Short Term Holder MVRV

In his strategy session streamed on July 19, Tony Vays, independent Bitcoin analyst, said, 

I've pretty much been somewhat bearish most of this triangle, and I remain so right now. That's because I still think that a capitulation day is coming. This capitulation day is coming soon because I also believe that the price of Bitcoin will bounce this summer and be on the way back up, breaking the all-time high later this year.

Likewise, Scott Minerd, chairman and chief investment officer of Guggenheim Investments, believes that under the technical consensus that "every time a support level is tested, it becomes weaker," the $30,000 support level may soon fail to hold Bitcoin price.

According to Steen Jakobsen, chief investment officer at Saxo Bank, the only way for Bitcoin price "to dig itself out of a hole" is with a sustainable break above $32,000.


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