Bitcoin appears to have finally emerged from weeks of stagnation with an 11% rally, signaling a notable shift in market momentum. This move is expected to have attracted renewed attention from several market participants who may be keen to re-enter the market.
However, an influential on-chain analyst has come out to explain why Bitcoin traders should be cautious during this phase of the cycle. According to the market expert, the most optimal entry point may not be close to the current price level.
MVRV ratio and realized price reveal short-term strength, but not a market top
In a recent Quicktake post on the CryptoQuant platform, on-chain analyst GugaOnchain says dug to the reasons why it may not be the time to re-enter the Bitcoin market. The expert started by highlighting changes in the ratio of market value to realized value (MVRV), in addition to that of the Realized Price metric.
According to GugaOnchain, the MVRV ratio is currently above the 30-day moving average of 1.2947, indicating that Bitcoin’s recent upward price movement has gained validity. Supporting this trend, the Bitcoin Taker Buy/Sell Ratio on Binance has also shown increased buying aggression, reinforcing the idea that market participants are actively pushing prices higher.
Meanwhile, the bigger macro picture shows that the market is still in an overheated phase. This is because the current MVRV value of around 1.3856 is significantly lower than that of the SMA-365 (known as the macro line), which is around 1.8620.
Technical Indicators Point to an Overloaded Bitcoin Market – Next Correction?
From a price action perspective, Bitcoin price may indeed be due for a retracement. According to the market expert, Bitcoin recently broke out of rising channel resistance on the daily time frame – a move typical of bullish continuations.
However, the Relative Strength Index (RSI) is now showing signs of tension. This is thanks to the recent RSI readings of 67.85, which is near the overbought area at 70.
As such, the Bitcoin market has higher chances of a near-term pullback. The analyst then concluded that it would be best to buy Bitcoin “not at this resistance break,” but instead at the bottom of the retracement.
In the scenario where the Bitcoin price pulls back, the crypto expert explained that this would move towards a “channel support” – specifically at levels between $70,000 and $65,000. At the time of writing, the price of BTC is around $77,014, reflecting a 2.8% increase since the last day.