TL;DR
- Bitcoin is trading 11% below its all-time high of $108,000, with the market structure remaining constructive and demand resilient.
- The Market Value to Realized Value (MVRV) ratio is at 1.32, indicating an average unrealized profit of 32% per BTC, similar to mid-April 2024.
- The 1-year MVRV Z-Score model shows the market cooling off from a rally, with short-term holders facing potential sell-side pressure if momentum stalls.
Bitcoin has entered a correction phase, trading 11% below its all-time high (ATH) of $108,000. Despite this decline, the market structure remains constructive, with demand showing resilience. This article delves into the current state of Bitcoin’s market, analyzing key metrics and their implications for future trends.
Market Correction and Support Levels
As Bitcoin corrects from its ATH, a significant proportion of speculative excess has been eliminated from the market. The current price is approximately 10% above the short-term holders’ cost basis of $88,400, indicating potential downside risk if momentum stalls.
Unrealized losses are primarily held by short-term holders, with 2.0 to 3.5 million BTC underwater, reflecting moderate stress levels compared to previous drawdowns.
Evolving Peaks and Market Sentiment
The Realized Price, representing the average price at which all Bitcoins last moved on-chain, is a crucial metric for understanding market sentiment.
The Market Value to Realized Value (MVRV) ratio, currently at 1.32, indicates that the average unit of BTC holds an unrealized profit of 32%. This structure is similar to the post-ATH period in mid-April 2024, suggesting an overall positive sentiment despite the market correction.
Statistical Analysis and Z-Score
To account for diminishing peaks in MVRV over successive cycles, statistical methods such as the Z-Score are employed. The Z-Score normalizes the oscillating range of MVRV, providing a clearer representation of market dynamics.
Using a 1-year rolling window for the Z-Score calculation, the current market is identified as being in a bullish phase, with Bitcoin trading at $94,398, above the 1-year mean of $90,900 but below the +2σ threshold at $112,600.
Assessing Investor Profitability
The 1-year MVRV Z-Score model shows the market cooling off from a powerful rally. Unrealized losses are concentrated among short-term holders, who acquired their coins near the market peak.
The average short-term holder cost basis is $88,400, with the spot price trading 9.2% above this level. If the market fails to regain upward momentum, falling below this cost basis could precipitate additional sell-side pressure.
Bitcoin’s market correction has brought it 11.1% below its ATH, but key support levels remain intact, suggesting a continued bullish market structure. The relatively light levels of distress and the optimized MVRV Z-Score provide a framework for navigating near-term market phases.
