BTC May Need to Fall to $19.3K to Cool Bitcoin Profit Taking – New Data
Bitcoin (BTC) needs to return below $20,000 to reset a key metric that covers speculative profit-taking, data shows.
In the latest edition of its weekly newsletter, “The Week On-Chain”, research firm Glassnode revealed that short-term holders (STHs) can dictate BTC price resistance.
Profit taking reinforces resistance levels
As BTC/USD rose towards $25,000, STHs – those who have held coins for 155 days or less – began to see significant returns on their investments.
This was captured by the Market Cap to Realized Value (MVRV) metric, which compares the market cap of Bitcoin to the value of coins moving on-chain.
“By comparing these two metrics, MVRV can be used to get a sense of when the price is above or below ‘fair value’, and to assess market profitability,” explains Glassnode in an accompanying guide.
MVRV passed 1.2 on its way to multi-month highs, coinciding with $23,800 emerging as an area of BTC price resistance.
As Glassnode writes, “the opportunity for STHs to take profits tends to grow during periods where the average STH is 20%+ in-the-money, returning an STH-MVRV above 1.2.”
“The recent rejection at the $23.8k level resonates with this structure, as STH-MVRV hit 1.2 before stopping,” it continued this week.
“Should the market return to $19.3k, it would bring STH-MVRV back to the value of 1.0, indicating that spot prices have returned to cost basis for this cohort of new buyers.”
$19,300 would thus constitute something of a magnetic target in terms of profitability and incentive not to sell for STHs.
As Cointelegraph reported, Glassnode is not alone in suggesting that $20,000 may not hold as support for BTC/USD, and that a new local low could form below that line in the sand.
Bitcoin in “transition phase”
Also in Glassnode’s crosshairs are the long-term holder (LTH) cost base and the activities of whales invested in Bitcoin since the end of the last bear market in late 2018.
Related: BTC price ‘in the chop zone’ – 5 things to know in Bitcoin this week
The realized price of the so-called “old” supply — the price at which it last moved in aggregate — currently stands at $23,500, further solidifying the area as a key battleground.
On the downside, Bitcoin’s total realized price is at $19,800, again adding to the idea that this zone could eventually form support.
“The Bitcoin economy often reacts not only to levels widely observed in traditional technical analysis, but also to the psychological cost base levels of various investor cohorts printed on the chain. This happens not only with respect to their realized price, but also with respect to the degree of profits and losses that are kept within their supply, Glassnode concluded.
“From this lens, the market is currently in a transition phase, constrained above the realized price of older supplies and also by the average whale that has been active since the bottom of the cycle in 2018.”
BTC/USD was trading at $22,400 at the time of writing on March 7, according to data from Cointelegraph Markets Pro and TradingView.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
