- Bitcoin’s MVRV ratio and NUPL have not yet hit a strong accumulation zone
- The coin’s UTXO may need to break out of its resistance to sustain January’s momentum while U.S interest rates could also affect BTC’s demand
Bitcoin’s [BTC] 43% hike in January surely brought rays of hope to investors dampened by 2022’s market display. In fact, it was one of the best first month performances of the coin in about ten years. However, on-chain data revealed that enthusiasts looking to accumulate more of the king coin might not find it challenging to pick out a guaranteed buying opportunity in February.
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Playing second fiddle in the second month?
According to On-chain Edge, a pseudonymous CryptoQuant analyst, expecting a replica of BTC’s performance in February could be a stretch. The analyst’s viewpoint was based on the Market Value to Realized Value (MVRV) ratio.
The MVRV ratio displays possible buying prospects due to the market capitalization and realized capitalization trend. However, On-chain Edge pointed out that the MVRV ratio was 1.16, at the time he published. Since it was not below a value of 1, the prevailing BTC position might be considered shaky as one to potentially make significant gains.
Source: CryptoQuant
Besides the MVRV ratio condition, the analyst also focused on the state of the Net Unrealized Profit/Loss (NUPL). This metric is laser-focused on the market cap and realized cap difference. Hence, also revealing whether the Bitcoin network is in profit or loss. The analyst noted,
“The increase in unrealized profits over the last few weeks has led to a dramatic rise in the NUPL value, which is currently at 0.14, higher than before the FTX crash.”
While this could be considered a move in the positive direction, there is also a resistance that could draw back the NUPL’s improvement.
At press time, the NUPL’s 0.14 value meant buying at the current BTC price remains risky. Meanwhile, a consistent increase would mean difficulty in re-entering an excellent buying zone. The analyst then concluded that investors could either wait on the next buying chance or hope for a significant breakout.
Source: CryptoQuant
January’s momentum could stay alive if…
While the data mentioned above means that a price reversal could be on the cards, bullish possibilities are also not down and out. Yonsei_dent, who dropped his two cents on the matter, was at the forefront of this opinion.
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According to him, the six to twelve months Unspent Transaction Output (UTXO) Age bands could have a say in the coin’s trend.
Source: CryptoQuant
Yonsei_dent used the 2021 bull market and early 2022 bear condition as an illustration. The analyst mentioned that it is necessary to consider the UTXO due to its influence on BTC’s support and resistance. He wrote,
“If the market price reaches the Realized Price (6m~12m), that level can act as a resistance zone. If it breaks out clearly at that level, it will build momentum into the bull market.”
Moreover, the release of the interest rates by the U.S Federal reserves could also impact BTC’s February trajectory. In fact, according to CME Group, there is a high chance of the Fed raising interest rates. This, in turn, could cut down investors’ palate concerning Bitcoin demand.
