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Despite the fact that the crypto market’s king coin saw a spectacular surge in the first few months of 2021, the continuous negative period that followed has managed to dominate the market presently.
Bitcoin had lost 4.21 percent of its value in the previous week and was trading in the $33k region at press time. Nonetheless, the one unanswered issue that looms over the market at the moment is when BTC will begin surging again. Even if there is no simple solution to this issue, Bitcoin’s on-chain measurements do give some insights.
At the time of writing, the Reserve Risk indicator, which measures the risk-reward balance in terms of long-term HODLers’ confidence and conviction, was at 0.003. It should be highlighted that a reduced reserve risk indicates a high level of HODLer confidence. At this point, the risk/reward ratio for investing appears to be rather appealing.
When the currency reached its all-time high in mid-April, the reserve risk was 0.007. In that regard, the current 0.003 represents a relative undervaluation of Bitcoin. The RR index peaked during Bitcoin’s rallies in 2013 and 2017, however after that, the currency went through a significant negative period, and the RR shrank as well. According to the comparison, BTC’s price movement has followed the same path as the RR index.
The fact that this measure continues falling and hasn’t bottomed out suggests that the bear run isn’t over, and that despite the brief reprieve, a further decline may be expected in the following days.
Another important indicator to examine at this stage is Bitcoin volatility. At the time of writing, the measure was still declining. Indeed, according to BitPremier’s data, the 30-day BTC/USD volatility stood at 4.58 percent — a level last seen in March, just days before the coin reached its all-time high.
Keeping other considerations aside, the currency should be able to replicate its April ATH run in the following days if similarities are to be drawn. That’s not how the Bitcoin market normally works, is it?
With the present sluggishness, the chances of Bitcoin bouncing in its current $30k-$40k rangebound zone for the next several days remain somewhat greater than a full shift in trend.
Furthermore, the Bitcoin MVRV Long/Short difference suggested a significant developing trend. On July 10, this indicator fell below 0% for the first time in 14 months. When this long-term indicator falls below zero, it indicates that a mix of short-term and long-term traders are losing money on their investments.
Thus, this dip postulates that BTC is in the buy zone. On-chain data aggregator platform, Santiment, in one of its latest tweets highlighted,
“When this occurs, crypto’s #1 asset [Bitcoin] is likely to see an increase in market price.”
Given the current position of the market and other measures, an immediate up surge appears to be out of the question. However, if Bitcoin can gather significant buyer momentum in the next days, the likelihood of a trend reversal will increase.