Last Updated: 7 March 2023
The bitcoin price needs to drop to $19,300 for a key on-chain indicator to reset. That is one of the conclusions in a market report by data provider Glassnode. Their data shows that mainly short-term speculators are dominant in the current market.
Market Value to Realised Value (MVRV)
The Market Value to Realized Value (MVRV) is a way of determining market sentiment. We talk about short-term holders as soon as they hold their bitcoin for less than 155 days. Glassnode knows from long-term research that people who hold their bitcoin for longer than 155 days are historically less likely to sell suddenly. In short, the probability increases that they will not redeem their btc after passing that benchmark of ~155 days.
The MVRV is the ratio of the total value of the bitcoin market to the average redemption price. So an MVRV score of 2 means bitcoin is currently worth twice as much as the buying price. Glassnode has combined the MVRV with market data from short-term and long-term holders. The current MVRV score is 1.2, so the market price is ~20% higher than the short-term holder’s buying price.
And that affects the market because that group is going to take profits. Hence, the share price is struggling to break through that resistance, as there is less buying volume in return. The researchers state:
“By comparing these two statistics, MVRV can be used to get an idea of when the price is above or below ‘fair value’, and to assess the profitability of the market. The recent rejection at the $23,800 level appears to be a result of profit-taking by this group. Should the price fall to $19,300, it brings the STH-MVRV ratio back to the value of 1, and that means the spot price has returned to the buy-in price of this short-term group’.
Bitcoin in transition
What about long-term holders (LTH)? Glassnode data shows that the realised price (purchase price) of this group is $23,500. Combining both groups (short-term and long-term), the median repurchase price is $19,800, which Glassnode’s analysts say should become an important support zone. They state:
‘The bitcoin market often reacts not only to levels commonly observed in traditional technical analysis, but also to the psychological cost basis levels of different groups in the market. This happens not only with regard to their realised price, but also whether they are at a profit and loss on paper. The market is currently in a transitional phase, above bounded by the realised price of long-term holders and whales who are less active currently’.
A speech by Jerome Powell, the chairman of the US Federal Reserve, is also scheduled for 4pm Dutch time this afternoon. What will be the interest rate policy for the coming months? Dutch trader Michaël van de Poppe thinks interest rates will rise by 25 interest rate points in March.
Important day today as Powell will be speeching.
We'll be looking out for any hints on hikes, interest rate policy and such.
Current estimate; 25bps rate hike in March, but expectations are already rising that 50bps might be possible.
— Michaël van de Poppe (@CryptoMichNL) March 7, 2023
The bitcoin price is currently hovering above $22,500 at the time of writing.