Research has cautioned that a “market correction” may be triggered if Bitcoin (BTC) prices exceed $33,000.
In its most recent edition of “The Week On-Chain” newsletter, Glassnode, an analytics firm, warned of potential speculative selling risk in the near future.
Bitcoin speculator profits average 12%
Short-term Bitcoin holders (STHs), the more daring BTC speculators, have regained prominence in 2020.
In recent weeks, the aggregate cost basis of Bitcoin seemed to provide strong support for the BTC price near $26,000. However, according to Glassnode, this could soon change and have the opposite effect.
Researchers suggested levels at which speculators should exit their positions in order to maximize their profits, as part of their analysis of short-term and long-term holder activity.
The MVRV metric was used to do this, which calculates the spot price of coins compared to the price they last sold for. The figure, which indicates either a profit or a loss, usually hovers around 1, which is equivalent to the “break even” cost.
“The Short-Term Holder MVRV indicator has had a powerful response to the break-even point of MVRV = 1,” as highlighted in “The Week On-Chain”.
If BTC prices continue to increase, the STH-MVRV ratio will also go up – and when it goes beyond 1.2, the risk of investors cashing out their profits usually increases.
“Glassnode noted that when the metric exceeds the range of 1.2 to 1.4 (approx. $33.2k to $38.7k), the likelihood of market corrections increases as investors start to have considerable, yet unrealized, profits.”
$25,000 represents “seller exhaustion”
Further evidence further supports the notion that the recent lows close to $25,000 eliminated those wishing to sell.
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The Spent Output Profit Ratio (SOPR) has demonstrated, numerous times, what Glassnode terms as “exhaustion” among sellers when the profitability of BTC is close to or at that level.
Since the end of 2022, exhaustion levels have been on the rise due to Bitcoin’s multi-year lows, which were a result of the FTX exchange incident.
On multiple occasions in the recent past, we have seen evidence of sellers becoming exhausted below the lower band, culminating in the lowest point of $25.1k before the price moved back up above $30k, according to Glassnode’s analysis with the accompanying chart.
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