Why buying Bitcoin at $50K may be a wrong move

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  • The 30-day MVRV ratio sug­gests a loom­ing cor­rec­tion for BTC.
  • Open Inter­est climbed to its high­est in over two years as Bit­coin eyed $52,000.

If you are plan­ning on buy­ing Bit­coin [BTC]  for quick gains because the price hit $50,000, then you might have to give it anoth­er thought. Well, one can argue that the sen­ti­ment around the mar­ket was bull­ish. But his­to­ry, as AMBCryp­to con­firmed, revealed that we might not yet be in an “up only” sit­u­a­tion for the coin.

Before we arrived at this con­clu­sion, we ana­lyzed Bitcoin’s Mar­ket Val­ue to Real­ized Val­ue (MVRV) ratio. We also eval­u­at­ed how it relates to the price action. When the MVRV ratio is high, it sug­gests that the mar­ket val­ue of Bit­coin has sur­passed the aver­age val­ue at which coins last moved.

Hold on! The coast is not yet clear

If this is the case, BTC could be con­sid­ered over­val­ued. On the oth­er hand, a low MVRV ratio sug­gests that the coin is under­val­ued. At press time, AMBCrypto’s analy­sis of San­ti­ment showed that the 30-day MVRV ratio was 14.31%.

Bitcoin price action when compared to the MVRV ratio

Source: San­ti­ment

His­tor­i­cal­ly, when­ev­er the met­ric ris­es as high as this, BTC cor­rects after­ward. There­fore, this increase could be a warn­ing sig­nal that the coin price might drop sig­nif­i­cant­ly over the com­ing days.

As of this writ­ing, Bitcoin’s price was $50,105. This val­ue rep­re­sents a 17.83% increase in the last sev­en days.

With the price recov­ery, one can assume that the liq­uid­i­ty flush post-ETF approval could be over. Despite the price pre­dic­tion, investor inter­est in Bit­coin has been soar­ing. Evi­dence of this could be found in the Open Inter­est (OI). The OI is the total amount of open futures contracts.

At press time, Glassnode’s data showed that Bitcoin’s OI was over $19 bil­lion. This rep­re­sents the high­est val­ue seen for over two years.

Chart showing how Bitcoin Open Interest rose to highest in two years

Source: Glassnode

Buy now, wail later, or wait now, buy later

The OI increase sug­gests that buy­ers were more aggres­sive in the mar­ket while sell­ers have tak­en a back­seat. Should the OI con­tin­ue to increase along­side the price action, BTC might head toward $52,000. But if the aggres­sion sub­sides, Bitcoin’s price might dump into the key sup­port just before it begins anoth­er rally.

From a trad­ing per­spec­tive, the Expo­nen­tial Mov­ing Aver­age (EMA) showed a bull­ish bias for BTC.

As of this writ­ing,  the 20 EMA (blue) had crossed over the 50 EMA (yel­low). Like­wise, the 50 EMA had crossed over the 200 EMA (cyan). Crossovers like these sug­gest that Bit­coin might stay bull­ish whether in the short term or not.

BTC had also bro­ken above all three EMAs, indi­cat­ing that a strong resis­tance was not yet ahead. How­ev­er, the Rel­a­tive Strength Index (RSI) indi­cat­ed that the coin was over­bought since the read­ing crossed 70.00.

The Mon­ey Flow Index (MFI) also rose past 80.00, sug­gest­ing the same con­di­tion as the RSI.

Bitcoin short and long term price prediction on the 4-hour chart

Source: Trad­ingView

Read Bitcoin’s [BTC] Price Pre­dic­tion 2024–2025

While this infers intense buy­ing pres­sure, it could also lead to a pull­back for the coin. Should BTC retrace, the price might fall to the $46,000 to $48,000 region. In the long term, this might serve as anoth­er buy­ing opportunity.

But mar­ket play­ers who want short-term gains might need to wait for more cor­rec­tion as prof­it-tak­ing can appear at any point in time.

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