Bitcoin has been on a roll lately, gaining over 4% last week and even crossing the $60,000 mark. But is this just a temporary bump, or is Bitcoin finally entering a bullish trend?
MVRV Ratio: The Key Indicator
One analyst, Ali Martinez, believes the Market Value to Realized Value (MVRV) ratio holds the key to understanding Bitcoin’s future.
The MVRV ratio basically tells us if Bitcoin is overvalued or undervalued. A high ratio means Bitcoin is probably overvalued, while a low ratio suggests it’s undervalued.
Martinez says if the MVRV ratio closes above its 90-day moving average, it would signal a bullish trend. This would be a big deal, especially after the sideways movement Bitcoin experienced in July and August.
If this happens, Bitcoin could even reach $68,000-$70,000, where its next major resistance level lies.
New Futures Contracts: A Potential Risk
However, there’s a potential risk on the horizon. Bitcoin traders have opened about $2 billion worth of futures contracts in the last two days. While this shows a lot of interest in Bitcoin, it also means there are a lot of leveraged positions.
This could lead to a “long squeeze” if Bitcoin’s price drops. Basically, traders with leveraged positions might be forced to sell their Bitcoin, pushing the price down even further.
The Bottom Line
Bitcoin’s recent gains are promising, but it’s still too early to say if a bullish trend is truly underway. The MVRV ratio is a key indicator to watch, and the new futures contracts add a layer of risk.
For now, Bitcoin is trading around $62,875, but it’s important to stay informed and monitor the market closely.
