Bitcoin (BTC) recently encountered a significant challenge after surpassing the $67,000 mark. Last week, its upward trend culminated at $72,000 on May 21. However, BTC has since declined by 5.7%, settling at $67,800 at the time of writing.
Why Are Bitcoin Inflows Concentrated in the US?
A recent study probed into the demand for Bitcoin-backed investment products, with a majority of the inflows originating from the United States. Despite the recent decline, which interrupted the upward trajectory, the long-term forecast remains optimistic. According to one key indicator, the bull market is only halfway through its cycle. Crypto analyst Axel Adler highlighted the MVRV Z scores in a post, suggesting that the current cycle is far from over.
The MVRV metric assesses whether Bitcoin is undervalued or overvalued compared to its fair value. This involves comparing market capitalization to the total capital inflow into Bitcoin. When the market value significantly exceeds the realized value, it signals a potential peak. Specifically, the MVRV Z-score measures the disparity between these values relative to the standard deviation of Bitcoin’s market value. Historically, an MVRV-Z score of 7 or higher indicates a market peak.
What Does Historical Data Indicate?
The MVRV Z-score reached 3.07 during the latest run, indicating possible further price increases in the coming months. Notably, Bitcoin holders who had held BTC for six months or longer were active on February 28, particularly those in the 3-6 month range, suggesting profit-taking behavior.
Similarly, those who had held BTC for 1-3 months and sold on May 21 when prices exceeded $70,000 were also active. However, older holder groups exhibited less selling activity on exchanges in April and May, maintaining optimism for a post-halving price surge in the cryptocurrency market.
Key Takeaways for Investors
- Monitor the MVRV Z-score for potential market peaks.
- Consider the behavior of different holder groups to gauge market sentiment.
- Stay updated on regional inflows, particularly from the US, for investment trends.
- Be aware of historical patterns that could signal future price movements.
In conclusion, while Bitcoin faces new resistance levels, long-term indicators suggest the bull run is far from over. Investors should keep an eye on key metrics and historical data to navigate the evolving market landscape.