Bitcoin (BTC) has hit $ 19,400 in the last 24 hours, a critical resistance level since early December. However, signs in the chain indicate that the dominant cryptocurrency could either freeze or strengthen until early 2021. While Bitcoin is nearing a constant high of around $ 20,000, there are good reasons to expect more sideways action.
Chain analysts mainly look at two indicators to measure continuous growth: profit-on-product ratio, or SOPR, and long-term MVRV. SOPR shows whether short-term holders are selling at a profit or at a loss. If the SOPR increases, it means that investors are selling at a profit, which usually means there is room for a slight correction. But if the SOPR falls, it means that retail investors are likely to be shocked and the upward trend is likely to reverse.
Long Term Carrier MVRV is an indicator that determines if Bitcoin is overvalued or undervalued. MVRV divides the price at which investors buy bitcoin by the current market value. The indicator allows you to determine if investors are accumulating BTC at an abnormally high price that makes the rally so hot. Growth will not be sustainable if MVRV exceeds level 20.
SOPR and MVRV in progress
Bitcoin is currently in a perfect position, with SOPR indicating a potential decline in profit and MVRV indicating a long-term rally. The trend is positive for BTC as it shows that the overall bullish trend is likely to be healthy even in the event of a short-term correction or consolidation phases.
Willie Wu, network analyst and founder of Woobull.com, said there is room for a reboot in the SOPR system. Based on historical cycles, Wu pointed out that this could happen before January. Thus, the likelihood of Bitcoin consolidation or stagnation over a long period of time is at least still high. While this does not mean Bitcoin will see a larger correction, it could lead to less volatility and more cautious price movements in the short term. Wu explained:
“When the SOPR starts to decline, profits are generated to take profits. We are waiting for all profitable investors who want to sell will complete their sells and when that happens the rising currencies will no longer be profitable, the SOPR will go to 1.0 and we can move forward. Estimated arrival time in January, possibly. “.
Long-term carrier MVRV is one of the positive factors that can offset the strong sales generated by SOPR in the short to medium term. Analysts at Glassnode explained that MVRV is far from the danger zone, where local peaks were previously noted. For example, when bitcoin hit its all-time high in December 2017, the long-term holder of the MVRV exceeded 20. However, this calculation is currently around 3.
Both SOPR and MVRV indicate that Bitcoin is still in the early stages of a rally. The SOPR is much lower than it was during its 2017 peak, as is the MVRV. According to history after half a cycle, bitcoin tends to peak 12-15 months after block rewards are halved. If a similar cycle repeats itself in the second half of mid-2016, BTC could peak in mid-2021.
Glassnode analysts explained that the MVRV ratio is currently very optimistic, adding: “When LTH-MVRV reaches the red value (above 20), it usually indicates a global peak. But as we can see in the chart below, Bitcoin’s LTH-MVRV is still very far) from the red zone. ”
If the $ 20,000 falls, a major rally could begin.
However, a bitcoin value in excess of $ 20,000 is in the short term. There are mixed opinions about what will happen after BTC breaks the record. Some speculate that there could be a peak in the eruption in the $ 20,000 to $ 21,000 range with a peak of euphoria. Others say retail interest in Bitcoin may start.
There are two main reasons for the increase in general interest in bitcoin after BTC hit a new all-time high. First, many private investors lost significant amounts of capital in 2017, buying nearly $ 20,000. Thus, persistent highs remain a hurdle for many investors. Secondly, the historical ceiling for BTC does not exceed $ 20,000, so the pricing period is likely to begin.
A technical analyst with a pseudonym known as “Crypto Monk” said the $ 20,000 break represented a “scenario of extreme pain”: “All these people who could have jumped below $ 10,000 but decided to go through crazy people. The low prices they now hope the girl will have a second chance. ”
Cryptocurrency trader Eric Theiss told Cointelegraph that he expects Bitcoin to top $ 20,000. Tees said that Bitcoin is likely to see a new high in January 2021, which should continue the bullish trend after some consolidation:
“I expect bitcoin with the latest news of banking interest and continued retail growth to be worth $ 20,000 and up. We undoubtedly see the continuation of this trend and the birth of a new trend. The best choice for listing right now might be in the $ 19,000 range or if there is a break.