Bitcoin’s (BTC) retreat from its record high of $ 67,000 to below $ 60,000 hasn’t stopped the bulls from targeting another high, according to an indicator that seeks to predict market lows and highs.
The risk figure, known as MVRV, represents the ratio of the market value of Bitcoin to its realized value – similar to the price-to-book value ratio (P / B), which compares a company’s market value to its book value. MVRV tries to determine whether an asset is undervalued or overvalued.
A 2017-like bullish setup
An MVRV value above 3.7 warns of a Bitcoin top-out and leads to sell-offs. On the flip side, an MVRV reading below 1 implies buying pressure on the prospect of Bitcoin bottoming out.
MVRV has historically helped Bitcoin traders identify selling and buying pressures in the Bitcoin market. For example, the orange overlays in the graphic below represent the correlation between Bitcoin price and its MVRV output.
Bitcoin price versus MVRV. Source: CryptoQuant
Lennard Neo, Head of Research, stated in a new Stack Funds report released Nov. 4th that the current MVRV rebound is similar to that seen during the 2017 bull run, with a series of higher highs and higher lows (green) how the bitcoin price goes up.
In addition, the MVRV similarly rebounded after the price crash in May 2021, slipping below 1, suggesting the undervaluation of the Bitcoin market over the period. The metric rallied well to make higher highs and higher lows, confirming the uptrend for Bitcoin.
“With the MVRV currently trading at 2.72, far from its recent high of 3.96 in February, we expect further room for growth as it retests the 4.0 handle,” Neo wrote in a November 4th report and added:
“Should the MVRV uptrend develop in the near future, Bitcoin’s peak is likely to be a while away.”
Bitcoin to $ 70,000?
Neo added that Bitcoin’s recent ability to hold $ 60,000 as a support level shows its strong willingness to retest $ 67,000 – or even extend its upward move towards $ 70,000.
In addition to the MVRV, the analyst mentioned two on-chain metrics to explain his optimistic outlook. This included metrics that track bitcoin balances across all crypto exchanges and wallets that contain a large amount of BTC tokens.
In detail, the total number of Bitcoin held by exchanges around the world reached 2.311 million BTC, the lowest level in more than three years.
Bitcoin accounts for all stock exchange reserves. Source: CryptoQuant
Bitcoin’s largest investors also accelerated their accumulation frenzy as Bitcoin price rebounded from its crash in May through July 2021.
According to Glassnode’s Whale Supply Shock indicator, the so-called whales – addresses holding between 10,000 and 100,000 BTC – increased their Bitcoin purchases during the post-July rebound of below $ 30,000.
Bitcoin whale supply shock. Source: Glassnode
Dor Shahar, an on-chain analyst at CryptoJungle, called this a sign of a “multi-month upward trend in accumulation” and predicted new record highs for Bitcoin as whales withdraw more BTC supply.
Related: The Bitcoin whale indicator detects a multi-month accumulation trend while BTC is watching a $ 67K retest
“The ratio between the two groups, whales and other fish, is a measure of the supply dynamics,” he said, adding:
“Therefore, [the indicator] can help visualize the scarcity of supply that coins held by whales can cause and how it affects the price. There is also a more sensitive macro top display. “
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