Bitcoin Enters Into Undervalued Territory Again, But Analyst Says A Bottom Is Yet To Be Formed – Here’s Why

Bitcoin drops below the realized price again.

In its weekly highlights, released today, CryptoQuant argues that while Bitcoin is in a good accumulation zone for investors who employ the dollar cost averaging strategy with the asset once again undervalued below the realized price of about $21,700, it is still far from forming a price bottom.

“Unfortunately, a price bottom is still far from being entirely formed as these valuation metrics are still considerably below their 1-year MA,” the analytics firm explained, considering five key metrics.

Key metrics summary:

1. “The MVRV ratio is below 1 again, indicating that the average bitcoin holder is at a loss (green area).
2. Bitcoin holders experience a 1% loss at the current bitcoin price, as shown by the NUPL metric (line in blue).
3. The long-term bitcoin holders spend their coins at a 44% loss.
4. The total supply in profit has fallen sharply in the last week, standing at 56% of the total supply.
5. The Puell Multiple (measures 1-year miner revenue growth) also indicates bitcoin is in the accumulation zone (green area).”

It is worth noting that the Market-Value-To-Realized-Value (MVRV) is a key on-chain metric that has served as an indicator for previous market bottoms. Notably, a negative MVRV usually coincides with the market bottom. However, the time the market forms a bottom after this metric is reached usually varies. 

The MVRV first moved into negative territory on July 20, staying below zero for about 40 days. Meanwhile, another key factor considered is Bitcoin’s realized price. Historically, after the asset drops below its realized price and reclaims it, Bitcoin does not drop below it until it finishes a bull run. Notably, Bitcoin dropped below its realized price in July and reclaimed it.

Following the above metrics alone, Bitcoin should have formed a bottom. However, these appear to have been invalidated as Bitcoin has again fallen below the realized price without first starting a bull run.

CryptoQuant notes that the latest price move results from worsening macroeconomic conditions. Financial analyst John Bollinger in a tweet on Thursday, called for caution in the Bitcoin market as the dynamics continue to evolve. Meanwhile, in July, seasoned price action trader Justin Bennett warned that the present bear market is unlike any before and that old bear market metrics do not apply.

It is worth noting that last weekend, the crypto market experienced a flash crash as the release of FOMC minutes indicated the Fed’s desire to continue to raise rates. At the moment, Bitcoin is trading at the $21,243.03 price point, down 1.93% in the last 24 hours.