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The Bitcoin market continues to trade sideways as its MVRV (Market Value to Realized Value) ratio drops beneath key 1-year and 4-year marks. This means that the cryptocurrency may still be undervalued, as suggested by the analytical platform CryptoQuant in its recent X post (formerly Twitter).
In the past, the MVRV ratio has been a crucial factor for Bitcoin’s market: it has worked as a resistance or a support level. The current dip below these averages shows that the market is still trying to find its way back up to a bullish market.
CryptoQuant had earlier in the year been able to identify short-term price tops using on-chain data. Their analysis in March focused on the need to manage risks in a market subject to a lot of fluctuation. During the summer months of July, August, and September, the platform remained active in the market and predicted a possible near-term pullback that could lead to trend reversal. However, a correction did occur but it was not as dramatic as the previous analysis predicted and the consolidation phase has since been prolonged which indicates a slower than projected recovery.
Bitcoin’s Unusual MVRV Stagnation
This is an unusual pattern for the MVRV ratio. After initial market over-exuberance in the early stage of the recovery, the subsequent price correction was not as sharp as that expected. Consequently, the market is in the process of extended stagnation with the MVRV falling even beneath the 1Y and 4Y averages.
Even though there are signs of market rebound, the MVRV currently remains below the 1-year average meaning that the Bitcoin market is undervalued relative to the previous year’s results. This is good news for long term investors because, in the past, when the MVRV rises again above important averages, it has marked the start of a bullish trend.
For the Bitcoin to regain its full bullish momentum according to CryptoQuant the MVRV has to climb back above the 1-year moving average. Hitting this level may lead to another surge which may open the new round of the cryptocurrency development.
Although the present period of market consolidation may be rather discouraging to some extent, the absence of any major overheating over a long period of time opens up possibilities for future growth. Traders are observing important indicators such as the MVRV ratio and are looking for signals that the market is prepared for a change in direction.
Bitcoin’s market remains stable as the MVRV ratio indicates a condition of undervaluation. A breakout above the 1-year moving average could kick start the next bullish trend and the next few weeks will be crucial for Bitcoin traders.
