Bitcoin is still consolidating near the $30K level as the bulls and bears are fighting to establish control over the region and decide the next direction.
After falling impulsively below $40K, the price is forming a relatively tight bearish flag pattern on the daily time frame. This is a continuation pattern, and if the price breaks below it, another bearish move towards the $24K demand zone and even the $20K range (2017 All-Time High Range) would be possible.
On the other hand, a failure and an upside breakout from the flag would be considered a bullish signal. Nevertheless, the price will still need to break above the $32K level, the higher trend line of the pattern and the 50-day SMA, before a bullish reversal can be expected.
4 hour chart
The above bearish flag pattern is more clearly seen on the 4-hours time frame. This is currently being verified by two top and three bottom touches.
The price has been testing the $31K resistance level several times over the past few weeks and failed to break above it, apart from the fake bullish breakout at the end of May. However, a push above this level would be probable as considerable liquidity would be resting above it.
If so, the price may test the flag’s top range for the third time before a bearish breakout and lower towards the $24K demand area. The RSI is also oscillating around 50%, indicating that momentum is in a near equilibrium position, with neither bulls nor bears dominant in this time frame. A potential third touch of the top could also create a bearish divergence with the RSI, a signal that would further validate the bearish continuation scenario.
bitcoin mvrv ratio
History doesn’t repeat itself, but it rhymes. Most analytical methods in financial markets are based on the past, as analysts rely on repeating patterns in price and technical and fundamental indicators to predict the future value of a specific asset.
One of the most valuable indicators in determining whether a bitcoin is overvalued or undervalued is the MVRV ratio which is calculated by dividing the bitcoin market cap by the actual cap. Values below 1 indicate that bitcoin is undervalued, and values above three are often associated with overvalued prices.,
So, the MVRV metric can be used to estimate bull market tops and bear market bottoms. It is clear on the chart that the previous bear market has declined while the value of the MVRV ratio was below one. These often-long periods are when smart money accumulates BTC, creating enough demand to make the bottom of the price.
The MVRV ratio currently sits around 1.3, indicating that the price may still experience further downside before a cyclical bottom forms.
Another interesting point is the diminishing returns and losses over the past 12 years. This is related to bitcoin’s declining volatility on its path to becoming “digital gold” as it tries to transition from a highly volatile risky asset to a more stable, deflationary haven.
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Cryptocurrency charts by TradingView.