Bitcoin Enters Attractive Buying Zone, Despite Lower Profit Potential: Analysts
Summary:
According to two widely-used metrics, open interest (OI) weighted funding rate and the MVRV indicator, Bitcoin is currently in a potentially attractive buying zone. Despite warning that the certainty of these indicators has decreased over the years, analysts suggest that Bitcoin's market condition is generally favourable for buyers. Bitcoin's current MVRV score of 2.32 implies that there are still possible gains to be had. However, experts caution that the current buying opportunity is less profitable than those seen in the past few years.
Two common metrics used by cryptocurrency experts to monitor on-chain trading activity suggest that Bitcoin might be moving into a promising buying area. Trader "Mister Crypto" informed his 94,100 followers on April 23 that it's the most opportune time to purchase Bitcoin. Bitcoin's current price stands at $64,230. One of these indicators, the open interest (OI) weighted funding rate—which demonstrates the expense of managing Bitcoin futures positions—entered the plus side on April 24, after a full day in the negative, posting a 0.0093% rate based on CoinGlass data. While a current uptick is seen, it's far less than 0.0714% observed at the start of the month - a market correction experts consider advantageous.
Checkmate, an on-chain analyst, deemed this as one of the cleanest market resets he's witnessed in a while. The sturdiness of the rates may be signaling that Bitcoin is primed for elevation, commented Crypto Banter host Kyle Doops. These steeper funding rates suggest a rise in interest for longer trades, suggesting a more bullish market sentiment. Earlier in March, as Bitcoin's OI weighted funding rate witnessed a significant surge, the virtual currency hit an all-time high of $69,200. On March 14, the figure crossed that mark, touching $73,835.
However, Charles Edwards, the founder of the Capriole Investments fund, cautioned that while funding rates are generally good indicators, they don't necessarily have the same predictability they held previously.
The MVRV indicator, which seeks to determine Bitcoin's over or under valuation in relation to its fair market value, also points to a potential fall into more suitable purchasing conditions. As of recent updates, Bitcoin's MVRV score is 2.32, a reduction of 6.45% since April began. A score above 3.5 suggests a nearly peaked market, whereas a score under 1 suggests a market low. Edwards noted the current score still leaves enough room for gains over the upcoming year. Nevertheless, he admits the current buying opportunity is not as beneficial as those from the recent past. He asserted it's not deeply undervalued as it was a couple of years ago but also doesn't indicate excessive overvaluation, which would lie in the four, five, or six range.
Published At
4/25/2024 9:04:25 AM
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