Following the recent announcement of a rate cut by the United States, Bitcoin [BTC] has been on a gradual upward trajectory in terms of price movement.
The digital currency reached a peak of above $64,000 on September 23, marking an 8.5% increase in value over the past week.
After this surge, Bitcoin retraced slightly to $63,786 at the current moment, still showing a 0.2% rise in the last 24 hours.
Market watchers are now closely monitoring the asset’s performance, particularly the resistance and support levels, which could hint at a potential shift in market momentum.
An analyst known as CoinLupin on the CryptoQuant platform highlighted Bitcoin’s Market Value to Realized Value (MVRV) ratio as a crucial metric to gauge the market direction.
The MVRV ratio compares Bitcoin’s market value to its realized value, assisting traders in assessing whether the asset is overvalued or undervalued at a specific time.
Important Trend Indicator for Bitcoin
In a recent analysis, CoinLupin pointed out that Bitcoin’s 1-year and 4-year MVRV averages have historically played significant roles as resistance or support levels in different market cycles.
As per the analyst,
“The overall market tends to show a similar pattern.”
CoinLupin emphasized that during the recovery phases in 2023, the MVRV ratio offered valuable insights into Bitcoin’s price fluctuations.
The current market scenario appears to deviate from past trends.
Following a period of “overheating” in the recent recovery, Bitcoin’s price correction was less severe than anticipated, leading to an extended consolidation phase.
This prolonged consolidation period has caused Bitcoin’s MVRV ratio to drop below both its 1-year and 4-year averages.
While this could signal an undervalued market, the analyst indicated that for Bitcoin to regain strong bullish momentum, the MVRV ratio needs to surpass its 1-year average.
This could potentially trigger a new bullish phase, fostering possible gains in the upcoming weeks.
Open Interest and Active Addresses
Aside from the MVRV ratio, several other essential metrics warrant attention to anticipate Bitcoin’s future price movements.
According to Coinglass data, Bitcoin’s Open Interest, reflecting the number of open Futures contracts, has decreased by 0.85% to $34.78 billion.
This decline in Open Interest could indicate traders closing positions, signaling caution or uncertainty in the market.
In addition, Bitcoin’s Open Interest volume, measuring the total value of active contracts, has dropped by 20.86% to $45.77 billion.
A substantial decrease in Open Interest often implies reduced market participation, potentially affecting price fluctuations.
Conversely, data from Glassnode showcased a positive trend in Bitcoin’s active addresses, which have significantly recovered following a sharp decline earlier this month.
The number of active addresses, reflecting network activity, has risen from 600,000 to 797,000 as of today.
This uptick in active addresses could point towards revitalized interest in Bitcoin and might hint at stronger price movements ahead, especially with increased network engagement.