Despite a significant market correction, with Bitcoin’s value dropping to just below $65,000 and Ethereum trading around $3,500, key market indicators remain positive.
Bitcoin is currently trading at $65,217, a decrease of 3.34% over the past week due to increased selling pressure. On the other hand, Ethereum is on a path to recovery, trading at $3,534 with a minor increase of 0.34% in the last seven days.
Glassnode’s latest weekly report highlights the sustained optimism in the market. It notes that Bitcoin’s price volatility has resulted in sideways movement, often interpreted as investor disinterest. However, over 87% of Bitcoin’s circulating supply is still held at a profit, with investors experiencing an average unrealized gain of around 120%, similar to levels seen in previous market cycles near all-time highs.
The Market Value to Realized Value (MVRV) ratio, which measures these unrealized gains, indicates that the uptrend remains steady. The recent market peak saw significant profit-taking, particularly from long-term holders, increasing the market’s liquid supply. This excess supply requires time to be absorbed, leading to a period of consolidation that reduces selling pressure and maintains a balanced market condition.
Despite healthy investor profits, Bitcoin’s trading volumes on the network and major exchanges have decreased, suggesting reduced speculative activity and market uncertainty. Short-term holders have reduced their exchange deposits compared to earlier in the year, while long-term holders show minimal activity, indicating a state of equilibrium requiring significant price changes to trigger further market movement.
Most coins being moved are still profitable, with average realized gains outweighing losses. This indicates that while holders are selling, there is enough demand to absorb this pressure, though not enough for a significant upward movement. This situation benefits range traders and arbitrageurs more than those seeking directional movements.
The futures market also reflects a similar trend, with open interest exceeding $30 billion, close to its previous all-time high. Much of this open interest is due to demand-neutral strategies like cash-and-carry, which profit from price differences between spot and futures markets. Institutional investors are increasingly active, with open interest on the CME Group exchange reaching $10 billion. However, like the spot market, futures trading volumes have also decreased.
In conclusion, despite some challenges, the cryptocurrency market remains resilient and optimistic, with key metrics indicating potential for growth and stability in the near future.