On Thursday, US President Donald Trump reversed plans to impose new tariffs on Europe as part of his drive to acquire Greenland for the country. Bitcoin saw this [BTC] prices recover by 1% to reach $90,359. However, this revival was quickly reversed.
Bitcoin, which rose above the $94,500 level last week, tested the same level this weekend. Short-term market fears around a trade war hinted at a lack of appetite for risky assets, with the leading crypto falling to a low of $87,263.
According to AMBCrypto, while the market mood was defensive, the aforementioned price increase was not due to sustained aggressive demand from buyers. There may still be a threat of a transition to bear market conditions.
Explaining Bitcoin’s Soft Capitulation
Source: CryptoQuant Insights
In a message at CryptoQuant Insightsuser Donkerfost noted that the number of profit holders was too small to sustain rising demand. It was 71% – typically seen during a shift into a bear market.
The profit offer needs to rise above 75% and stay above it to reflect the market’s growing conviction. The early January rebound saw the metric jump to 75%, but holders chose to take profits and limit losses.
A deeper decline in supply and earnings would show that bearish sentiment could intensify.
The MVRV rates Bitcoin at its ‘fair value’ (realized value) to see whether it is overvalued or undervalued. At the time of writing, the MVRV-Z score stood at 1.12 – a sign that holders were witnessing unrealized gains, but not enough to trigger a massive sell-off.
For context, values below 0 represent the capitulation phases of the bear market. The previous two market tops occurred when the benchmark was between 3 and 5.
The spent output profit ratio measures whether coins are sold at a profit or not. Since late November, the SOPR has remained largely below 1, indicating that holders were selling at a loss. This investor fatigue is the ‘soft capitulation’, where weak hands leave the market.
If the MVRV Z-score were less than 1, it would imply that the market was resetting and that the price is close to fair value, or close to the average investor’s cost basis. A score of 1.12 is moderately bullish. Combined with the SOPR below 1 in recent weeks, this indicated that a local price floor could be forming.
This may change based on macroeconomic developments in the coming months. As things stand now, a transition to a full-blown bear market is not yet imminent, although Bitcoin has come close.
Final thoughts
- Bitcoin’s profit offer must rise above 75% and stay there to suggest the holder’s conviction.
- MVRV and SOPR metrics suggested a local price floor may be forming.