bitcoin price started Friday, August 16 below the $57,000 level, following a sudden 7% drop on Thursday. While the leading cryptocurrency is showing good signs of recovery, a prominent cryptocurrency analyst explained how the latest price drop may have pushed btc price into a bearish phase.
bitcoin MVRV Drops Below 1-Year Simple Moving Average (SMA): Impact on Price?
In a post on the x platform, popular cryptocurrency analyst Ali Martinez x.com/ali_charts/status/1824355700899778681″ target=”_blank” rel=”noopener nofollow”>shared that the bitcoin price has experienced a change in its cycle following the latest price drop. This on-chain revelation is based on Glassnode’s MVRV (market value to realized value) momentum indicator, which serves as a tool to identify macro market trends.
The MVRV momentum indicator is primarily composed of the MVRV ratio and the 1-year simple moving average (SMA). When the MVRV ratio rises above this SMA, it indicates a transition to the bullish market. Meanwhile, a break below the 1-year simple moving average signals a shift to the bearish phase.
Typically, strong breaks above the MVRV 1-year simple moving average (SMA) suggest that large volumes of bitcoin were purchased below the current price, showing that holders are now taking profits. On the other hand, when there is a strong break below the moving average, it indicates that large volumes of btc were purchased above the current price, with holders in the red.
<img decoding="async" class="aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/08/Is-Bitcoin-Price-in-a-Bearish-Phase-Here39s-What-the.jpeg" alt="bitcoin Price” width=”1199″ height=”675″/>
A chart showing the bitcoin price and the MVRV momentum indicator | Source: x.com/ali_charts/status/1824355700899778681" target="_blank" rel="noopener nofollow">Ali_charts/x
According to Martinez, the btc cycle moved into a bearish phase after the bitcoin price dropped below $61,500. This latest significant break of the MVRV ratio below the simple moving average (SMA) shows that a significant amount of btc was acquired above $61,500. However, the coins are now in the red, which can potentially lead to a large distribution by investors looking to cut their losses.
When a large number of investors are in the red, selling pressure increases, which could put further downward pressure on the price of bitcoin. Ultimately, this could lead to a situation where falling prices result in further selling of assets, thus strengthening the momentum of the bearish phase.
bitcoin price at a glance
At the time of writing, bitcoin’s price is still hovering around $59,000, reflecting a 2.5% increase over the past 24 hours. However, the leading cryptocurrency is down nearly 3% on a weekly time frame, according to data from CoinGecko.
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The price of bitcoin hovers around the $59,000 level on the daily timeframe | Source: BTCUSDT chart on x/sTSNpi9Y/" target="_blank" rel="noopener nofollow">TradingView
Featured image from iStock, chart from TradingView
