On-chain data indicates that a Bitcoin metric recently reached levels which have historically caused corrections to the cryptocurrency’s value.
Bitcoin is currently 40% above the cost basis of short-term holders
Maartunn, community manager at CryptoQuant Netherlands, explains in detail how the program works. post The BTC price is currently 40 percent above the cost of short-term investors.
The indicator of interest is “Market Value to Realized Value (MVRV) ratio“, which is a ratio that tracks the difference between the Bitcoin market capital and the actual cap.
You can also find out more about the following: “realized cap” This is a capitalization method for the asset which assumes the real value of a coin in circulation does not equal the current spot rate but the last time the coin was traded on the blockchain.
As the previous transfer was probably the last time the coin changed hands, the price then would be its current cost base. The realized cap is therefore the cost basis for the entire supply.
In this way, the value of a metric can show how much capital an asset’s owners have invested. The market cap, which is what they currently hold in value, can be compared to the realized cap when calculating the MVRV. This will tell us how much profit or loss the investors have.
The MVRV of the whole market is not of interest in the present discussion but rather a specific segment: “short-term holders” (STHs). All investors who purchased their coins in the last 155 days are included in the STH cohort.
The graph below shows the trend for the Bitcoin MVRV ratio over time, specifically for these investors:
Source:| Source: @JA_Maartun on X
As shown in the above graph the Bitcoin STH SVRV has exceeded 1 for quite some time as STHs were generating profits. But with the most recent rally in this asset, the indicator shot up to particularly high levels.
BTC’s spot price is currently 40% above the average cost of this cohort. This chart shows how this level has caused asset corrections in the past.
This does not mean the coin will necessarily correct itself, but based on the historical pattern there is a possibility.
This pattern may be due to Bitcoin investors being more prone to profit-taking as their gains grow.
BTC Price
Bitcoin has experienced significant volatility since its launch. new all-time high above the $69,000 levelIts price is now around $67.700.
BTC has experienced a rollercoaster ride over the past couple of days | Source: BTCUSD on TradingView
Featured image from André François McKenzie on Unsplash.com, CryptoQuant.com, chart from TradingView.com
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