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May 3, 2024 by Mishal Ali
Bitcoin has been on a wild ride in recent months. After hitting a new all-time high of $73,800, the volatile cryptocurrency has since pulled back over 20% to around $59,675. However, many analysts see this as a potential buying opportunity rather than a reason to panic. According to research from crypto exchange Bitfinex, several on-chain metrics are flashing signals that have historically coincided with Bitcoin bottoms.
#Bitcoin – Don’t Miss the Bottom Again
Since the $15,500 bottom, Bitcoin has experienced four pullbacks ranging between -20% to -23%, and a few more such pullbacks are likely as the price continues to rise towards its peak.
Historically, each of these pullbacks has been a… pic.twitter.com/tUoFednx9C
— Mags (@thescalpingpro) May 2, 2024
Bitcoin Historical Trends and Returns
The MVRV ratio, which measures BTC’s market value relative to its realized value, has dropped to 2.21 as of last Friday after peaking earlier this year. Readings below 1.0 have signalled bottoms in the past, while anything above 3.5 could indicate a market top. The current level suggests Bitcoin may be undervalued.
Furthermore, when MVRV dips below its 90-day average of 2.44, as it has now, BTC has historically seen average returns of 67% going forward. The stars appear to be aligning for an attractive entry point.
The open interest-weighted funding rate is also supportive after recently flipping from negative to positive territory. This indicates traders are willing to pay a premium to be long bitcoin, suggesting increased bullish sentiment.
Bitfinex notes that diminishing returns from the quadrennial “halving” event when new Bitcoin issuance is cut in half may be a headwind going forward as this impact becomes smaller in a maturing market. Still, with bitcoin currently retesting range lows around $59,000, this could be one of the final opportunities for investors to buy in before the next major uptrend takes hold. From a statistical perspective, the more times a support level is tested, the weaker it becomes until it finally breaks.
A decisive move back above the $71,000 range highs could validate the bulls and attract major new buying interest. On the flip side, a breakdown below $59,000 could trigger another leg down as momentum builders lose conviction. The indicators suggest the current risk/reward is favourable for accumulating more exposure. But Bitcoin has a habit of turning on a dime. Investors may want to keep some powder dry in case a final capitulation shakes out the remaining weak hands before the real rally can begin.
Related Reading | Bitcoin’s $59K Support Breach Triggers $120 Million Futures Liquidation: Report
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