Anika Begay
Bitcoin price started off below the $57,000 level on Friday, August 16, after a sudden 7% decline 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 SMA: Price Impact?
In a post on the X platform, popular cryptocurrency analyst Ali Martinez shared that the price of Bitcoin has undergone a change in its cycle after the latest price drop. This on-chain revelation is based on the Glassnode MVRV (Market Value to Realized Value) Momentum indicator, which serves as a tool for identifying macro trends in the market.
The MVRV Momentum indicator is mainly composed of the MVRV ratio and the 1-year simple moving average (SMA). When the MVRV ratio crosses above this SMA, it indicates a transition into the bull market. Meanwhile, a break below the 1-year simple moving average signals a shift into the bearish phase.
Typically, strong breaks above the MVRV 1-year SMA suggest that large volumes of Bitcoin have been purchased below the current price, showing that holders are now in profit. On the other hand, when there is a strong break below the moving average, it indicates that large volumes of BTC have been purchased above the current price, with holders in the red.
A chart showing the Bitcoin price and the MVRV momentum indicator | Source: Ali_charts/X
According to Martinez, the BTC cycle has shifted into a bearish phase after the price of Bitcoin fell below $61,500. This latest significant break of the MVRV ratio below the SMA shows that a significant amount of BTC has been acquired above $61,500. However, the coin is now in a loss, which could potentially lead to a major distribution from 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 lead to more asset dumping, thus strengthening the momentum of the bear phase.
Bitcoin Price at a Glance
At the time of writing, Bitcoin price continues to hover around $59,000, reflecting a 2.5% increase in the last 24 hours. However, the leading cryptocurrency is down nearly 3% on the week, according to data from CoinGecko.
The price of Bitcoin hovers around the $59,000 level on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
