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Here are three reasons why Bitcoin is ready for a recovery to $42,000

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Bitcoin price suffered a fatal setback after Russia attacked Ukraine. The same effect was seen across financial markets, including Russia’s stock market. Despite this sudden downswing, BTC’s on-chain metrics show signs that indicate a quick turnaround.

On-chain metrics reveal investors’ sentiment

Perhaps, the most important metric is the on-chain volume since it can be used to get a better look at the actions of investors. The on-chain volume for BTC spiked by 13.73 billion on 19 February to 46.38 billion on 24 February.

This uptick occurred as the price of BTC dropped from $40,122 to $34,400 in the same period. The divergence alone is enough to indicate that there was high interest among investors for this dip. And, thus it hints at accumulation.

A similar spike in volume was witnessed on 7 February after BTC crashed from roughly $57,800 to $41,600. This fractal nature of volume uptick indicates that investors were busy buying the dip.

Interestingly, both these bumps moved well above the 200-day Moving Average for the volume. Thereby, indicating long-term holders’ footprint.

BTC on-chain volume chart

This bullish outlook might seem unreliable at first glance, but the view is supported by the 30-day Market Value to Realized Value (MVRV) model. This indicator is used to measure the average profit and loss of investors over a particular time frame. A negative value below -10% often indicates an ‘opportunity zone’ where long-term holders buy from panic selling short-term traders.

The 30-day MVRV has seen a bump from -6.8% to $2.8% over the last three days, adding proof that long-term holders are indeed accumulating.

BTC MVRV 30-day chart

A much clearer picture of the BTC market can be discerned by looking at the funding rate chart. This indicator is used to identify the sentiment of the market. A higher but positive value indicates that most traders are bullish on BTC. And, a negative value often indicates that most of the traders are looking to short.

Lately, the funding rate was on a climb and showed no respite as it hit a new all-time high in early 2022. However, from a short-term perspective, the funding rate nosedived to -0.00071% during the crash, indicating the sentiment of the traders. However, it is currently hovering around 0.001%, revealing the bullish outlook around the king coin.

BTC funding rate chart

While things are looking up for BTC’s price in the short-term, the upside seems to be capped at around $43,000. Furthermore, any move beyond this level seems unlikely, especially if the buyers do not have their backs into the incoming uptrend.

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Manisha is a News Editor at AMBCrypto. With a Master's degree focused on Mass Communication, Manisha is good at multitasking with an eye for detail. She is fascinated by new, emerging technologies and her interests lie in the regulatory implications of such tech.

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Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.