TL;DR
- Profitability High, But Anxiety Simmering: While Bitcoin took a tumble recently, investors are still sitting on big gains overall. However, short-term holders who bought in at higher prices might be feeling nervous as the price stalls.
- $60k: A Pivotal Point: The current price range around $60k is a critical zone to watch. If the price breaks above $64k, it could trigger a surge in buying from short-term traders looking to lock in profits. Conversely, a drop below $50k, the True Market Mean, could signal a bearish shift.
- Buckle Up for Volatility: Despite the recent calm, on-chain data suggests a potential storm brewing. Low volatility often precedes a significant price swing, so brace yourself for the price to make a big move in either direction.
While recent Bitcoin price dips caused some fear, investor profitability remains strong. The MVRV Ratio, a profitability indicator, shows the average coin held at a 2x profit, a level often seen in bull markets. Analysing unrealized profits and losses further reveals:
The #Bitcoin market is in an interesting spot, with the average coin still up 2x, whilst most Short-Term Holders are underwater.
A multitude of volatility measures are also heavily compressed, suggesting a larger move is on the horizon.
Discover more in the latest Week… pic.twitter.com/8J0MAKRraf
— glassnode (@glassnode) July 3, 2024
- Coins in profit hold an average unrealized gain of +$41.3k, while those in loss hold -$5.3k.
- The magnitude of paper gains is 8.2x larger than paper losses, indicating a market potentially holding onto gains. This could be interpreted in a few ways. Perhaps investors are content to ride the wave or are wary of selling and triggering taxable events. It could also suggest a market waiting for a catalyst to push prices higher before offloading some holdings.
Grounding Expectations Using Confluence
Bitcoin’s recent consolidation has led to investor indecision. Here’s a framework to understand the current cycle:
- Deep Bear Market: Prices below Realized Price
- Early Bull Market: Prices between Realized Price and True Market Mean ($50k)
- Enthusiastic Bull Market (Current): Prices between ATH and True Market Mean
- Euphoric Bull Market: Prices above previous ATH
This suggests Bitcoin remains in an enthusiastic bull market, with the key support level being the True Market Mean of $50k. A break below this level could signal a shift in market sentiment, but for now, bulls appear to be in control.
Short-Term Holder (STH) Cost Basis and Investor Stress
Looking at the price-sensitive STH cohort, we see:
- Significant unrealized profit at $92k.
- Break-even level at $64k (current price attempting to reclaim).
- Significant unrealized loss at $50k, aligning with the True Market Mean.
With the price below the STH cost basis, investor stress might be rising, especially for those holding recently acquired coins. This could translate into increased selling pressure if the price dips further, but conversely, a break above the $64k resistance level could trigger a wave of short-term buying as traders seek to capture profits.
Technical Indicators Align with On-Chain Data
The Mayer Multiple, a price-to-200-day moving average ratio, also points to a price around $58k, aligning with other on-chain price models. This confluence of technical and on-chain data suggests that the current price range is a key area to watch.
Bitcoin Volatility Expectations
Recent low volatility suggests a potential surge ahead. A volatility contraction model indicates compressed investor expectations, often a precursor to increased volatility. This doesn’t necessarily imply a directional move, but rather a potential for a significant swing in either direction.
Overall, while the market appears calm on the surface, on-chain metrics hint at a coiled spring beneath. Profitable investors may be waiting for a breakout to offload holdings, while short-term holders are likely feeling the pinch underwater.
Technical indicators add weight to the importance of the current price range. With volatility expected to rise, a breakout – or breakdown – could be imminent, setting the stage for the next chapter in Bitcoin’s ongoing story.
