- BTC’s realized gains have risen to a 14-month high.
- A sustained jump in the trader’s average return can lead to a price correction.
For the first time since May 2022, Bitcoin’s [BTC] price broke through the $30,000 psychological price to switch hands at $31,200 during the July 3 intraday trading session.
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This price rally pushed the leading coin’s realized gains to a 14-month high, according to data from Sanitation.
On-chain assessment of BTC’s performance revealed that while the coin struggled with the USD 30,000 resistance level in recent weeks, deposits on cryptocurrency exchanges continued to decline. This indicated investors’ lack of interest in selling their BTC holdings.
Instead, many of them continued to collect coins.
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The surge in BTC accumulation in recent weeks pushed the average trader’s returns to the highest level since May 2022. An unabated surge in trader profits will transition into a price reversal event.
According to data from Santiment, BTC’s MVRV (Z-score) ratio was a positive 0.776 at the time of writing, suggesting that the leading coin was overvalued.
Source: Sentiment
When an asset’s MVRV ratio (Z-Score value) is overvalued, market participants have typically bid on the price of such asset beyond what is warranted by historical average realized value.
This may be due to speculative buying, investor exuberance, or other factors that push the price up in the short term. In such situations, a price correction or a period of consolidation often follows.
Furthermore, a look at the ratio of BTC’s on-chain transaction volume to profit-loss spike revealed that BTC profitable trades occur twice as fast as loss-making trades over several weeks.
Thus, a price cooldown may follow if profit-taking activity continues at this rate.
Source: Sentiment
On the price chart, BTC’s price was close to the upper band of its Bollinger Bands indicator. This suggested that the price of the coin was approaching the upper limit of its recent price range. It is often seen as an indication of a possible price drop.
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Key momentum indicators such as the Relative Strength Index (RSI), Money Flow Index (MFI) and Chaikin Money Flow (CMF) were positioned above their respective centerlines (indicating continued coin accumulation). However, BTC’s Aroon Up Line (orange) was on a 21.43% downtrend.
When an asset’s Aroon Up line is close to zero, its uptrend is considered weak.
Source: BTC/USDT on TradingView