Bitcoin could be set for more sideways movement in the near term as an overvaluation metric is currently flashing red, signaling a higher likelihood of profit-taking among Bitcoin holders.
Bitcoinโs (BTC) Market Value to Realized Value (MVRV) ratio, an indicator that measures whether the asset is overvalued or not, currently stands at +21%, indicating that the average investor who purchased Bitcoin over the past year is comfortably in profit, sentiment platform Santiment said in a report published on Monday.
Bitcoin may experience sideways price action
โWhile not at extreme historical highs, this is considered a mild danger zone, as it increases the risk of profit-taking,โ Santiment explained.ย
Bitcoin is trading at $115,800 at the time of publication, according to CoinMarketCap, approximately 6% below its all-time high of $124,128 reached on Wednesday.
Bitcoin saw a 10% price rally in the nine days leading up to the new high, but Bitfinex analysts said in a markets report on the day that the โrally quickly fizzled outโ due to the lack of macroeconomic catalysts needed to sustain the price.
Typically, when Bitcoin has reached new all-time highs and starts to consolidate or trend downward, investors have been more inclined to take profits, fearing that the asset has reached a local price top.
The Bitfinex analysts added that Bitcoin may experience sideways price action in the near term.
โThe market is now firmly in a consolidation phase, adopting a wait-and-watch stance as investors weigh upcoming macro catalysts,โ the analysts said.
One macro catalyst that many market participants are closely watching is the US Federal Reserveโs rate cut decision on Sept. 17, with 83.6% anticipating the long-awaited cut, according to the CME FedWatch Tool.
Many Bitcoin traders are not expecting upside in the near term
Bitcoin shorts have been piling up as well, with roughly $2.2 billion in short positions at risk of liquidation if Bitcoin climbs back to its $124,128 all-time high, according to CoinGlass.
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However, Santiment says the Bitcoin whales are confident in higher price levels.
โBitcoin’s largest holders are not selling into this rally,โ Santiment said.
โWallets holding between 10 and 10,000 BTC have continued to accumulate aggressively, even after the all-time high,โ Santiment added.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
