$24,400 could be the next major support level for Bitcoin, here’s why
Historical data from a chain indicator may suggest that the $24,400 level could be a major support level for Bitcoin right now.
Bitcoin STH MVRV will reach 1.0 if the price drops to $24,400
According to this week’s edition of the Glassnode report, the 1.0 level of Bitcoin STH MVRV has been a support point for the market during uptrends in the past. “STH” here refers to the “short-term holding group”, which is a Bitcoin cohort that includes all investors who have held their coins since less than 155 days ago.
The “Market Value to Realized Value” (MVRV) is an indicator that measures the ratio of the Bitcoin market value to its realized value. The “realized cap” here is a BTC capitalization model that aims to find the “real” value of the asset by assuming that the value of each coin in circulation is not the current price, but the price at which it was last moved on the blockchain.
Since the realized rate represents the price that the investors bought (which is the price at which their coins last moved), the comparison with the market value (that is, today’s price) can tell us the degree of profitability or loss among the overall market.
When MVRV is greater than 1, it means that the average investor has an unrealized profit with their BTC right now. On the other hand, values below this threshold suggest that the market as a whole has some amount of unrealized loss at the moment.
Now, “STH MVRV”, the actual indicator of interest in the current discussion, naturally measures the value of the ratio specifically for the coins owned by Bitcoin short-term holders.
The chart below shows the trend in the 7-day average value of this metric over the last few years:
The 7-day average value of the metric seems to have been above the 1.0 level in recent months | Source: Glassnode's The Week Onchain - Week 18, 2023
In the graph, Glassnode has marked the lines of the 7-day average Bitcoin STH MVRV that have been relevant to the price of the cryptocurrency in recent years.
It appears that short-term corrections for the asset have generally become more likely when this indicator has crossed a value of 1.2. At this level, the STHs have unrealized profits of 20%.
The recent decline in the cryptocurrency’s price from the $30,000 mark also took place when the metric was above this level. To be more specific, the indicator had a value of 1.33 when the asset was rejected, which suggests that the STHs had a 33% profit.
The reason why high MVRV values for this cohort have typically made a decline more likely for price is that the higher the STH’s earnings, the more likely they are to sell and reap their gains.
From the chart, it is visible that the research firm in the chain has also marked the relevance of the 1.0 level (that is, the threshold line between profit and loss) for the cryptocurrency. Interestingly, this level has generally provided support to the price during periods of uptrend.
The likely explanation behind this trend is that the 1.0 level serves as the cost basis for the majority of STHs in the market, so when the price hits this mark, these investors see this point as a profitable zone to accumulate more of the asset. Obviously, this behavior is only seen during rallies, as holders will only find it worth buying more if they believe the price has the potential to grow.
The way the market is right now, the price needs to drop to $24,400 to reach this 1.0 level. This implies that if Bitcoin observes a deep decline in the near future, $24,400 could be the level that could provide support for it, considering the pattern that has persisted over the past few years.
BTC price
At the time of writing, Bitcoin is trading around $28,500, down 1% in the past week.
Looks like BTC has seen some volatility recently | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Glassnode.com
