Analytics
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- Bitcoin’s 30-day MVRV reached bull market levels in early 2021, leaving many investors with unrealized gains.
- On-chain metrics show that miners are selling, adding headwinds to the ongoing rally.
- US banks are cutting ties with crypto exchanges, coupled with other developments starting to pile up.
The price of bitcoin has been one of the biggest reasons for this recent uptrend in the cryptocurrency market. As the rally continues to push some altcoins to new highs, investors should be wary of a sudden selloff in the market.
Here are three vital signs that indicate a reversal
Unrealized profits skyrocket
The Market Value to Realized Value (MVRV) indicator shows that many cryptocurrencies are overextended. This on-chain metric is used to determine the average profit/loss of investors who bought an asset in the last month.
The amount of unrealized profit is directly proportional to the size of the rally. For Bitcoin, the 30-day MVRV jumped to 27%, which means the average profit of all addresses that bought BTC last month.
For ETH, this number peaked at 19.6%, but over the past 24 hours, many investors have already taken profits, causing the price of Ethereum to sell off from $1,621 to $1,524. In response to this, the 30-day MVRV shows that the average return of all addresses that bought ETH last month fell from 19.6% to 7.53%.
BTC, ETH 30-day MVRV
Bitcoin miners remain pragmatic
Bitcoin miners continue to sell in the rally, as can be clearly seen from the Miner Position Index (MPI). This indicator is calculated by the ratio of the number of miners who send their mined coins to exchanges to the number of miners who send them to other addresses.
A high MPI indicates that a larger percentage of miners are sending their coins to exchanges, which is generally considered a bearish signal indicating that miners are selling their cryptoholdings.
The MPI jumped to 3.96 on January 14th as the price of bitcoin reached $20,957 and continues to rise, suggesting that miners are not overdoing it and sending their mined BTC to exchange wallets. This move by miners adds a headwind to the ongoing rally, leading to consolidation that could lead to a sell-off.
Cherry on the cake: ‘bad’ news is piling up
Regulators are restricting everything related to crypto after a series of unfortunate events in 2021, including big players like Terra, FTX, Three Arrows Capital (3AC), etc. In addition, the difficult situation in which Grayscale and its parent company Digital Currency Group (DCG) also found itself weighing on the markets.
This sudden but unexpected rally is exactly what it is. Even though it has been profitable so far, investors should be wary of a sudden reversal triggered by market events. One recent report states that Signature Bank is limiting the minimum buy-in amount of its crypto partners and users to $100,000.
Recent reports show that regulators have confiscated $50 million of Sam Bankman-Freed from the obscure state-owned Farmington Bank in rural Washington.
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