bitcoin has broken back above the $27,000 level over the past day, but if on-chain data is anything to go by, this rise may not last long.
bitcoin Investors Are Profiting at the Highest Rate in 3 Months
According to data from the on-chain analysis firm Holy, there is a possibility of a short-term correction for the cryptocurrency. The relevant metric here is the “daily on-chain trading volume profit-to-loss ratio,” which, as the name suggests, tells us how the profit-taking volume compares to the loss-taking volume on the network. bitcoin right now. .
This indicator works by reviewing the transaction history of each coin that is sold/transferred on the blockchain to see what price it moved to before. If the previous selling price of any coin was less than the current spot price, then that coin is being sold at a profit right now.
The sale of all these tokens would contribute to bitcoin‘s profit-taking volume, while coins of the opposite type would contribute to the loss-taking volume.
Now, here is a chart showing the trend of this btc metric over the past few months:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/09/Bitcoins-Rise-Above-27000-May-Not-Last-Heres-Why.jpeg" alt="bitcoin Profit Volume” width=”1546″ height=”1051″ loading=”lazy”/>
The value of the metric seems to have been quite high in recent days | Source: Santiment on X
As shown in the chart above, this bitcoin indicator has seen a huge rise as the price of the cryptocurrency itself has seen an increase beyond the $27,000 mark and has reached a value of 2.51.
When the metric has a value greater than zero, it means that the profit-taking volume is greater than the loss-taking volume. On the other hand, values below this threshold suggest the predominance of loss assumption.
At the current value of 2.51, the profit-taking volume exceeds the loss-taking volume by 3.51 to 1. This disparity between these two volumes is the highest it has been for about three months.
Historically, intense profit-taking has typically resulted in at least a short-term high for bitcoin, so it is possible that the metric’s current values could also result in a price correction.
In the chart, Santiment also attached the “market value to realized value ratio (MVRV)” data, which tracks the difference between bitcoin’s market capitalization and realized capitalization.
The last of these is basically a measure of the total amount of capital that investors as a whole have invested in the cryptocurrency, so this metric tells us how the value that holders currently have compares to their total investment.
You can see from the chart that bitcoin‘s 7-day MVRV ratio has turned noticeably positive with this rise, implying that investors are making profits at the moment.
The analysis firm notes that this metric returning below zero would be ideal for the next bullish leg, as loss of holders would lead to exhaustion of profit sellers.
btc Price
So far, despite the aggressive profit taking taking place in the market, bitcoin has managed to stay above the $27,000 mark.
<img decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/09/Bitcoins-Rise-Above-27000-May-Not-Last-Heres-Why" alt="bitcoin price chart” width=”1534″ height=”877″ loading=”lazy”/>
btc has observed a strong surge in the past day | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, Santiment.net
