Mid-January saw Bitcoin’s already tough price action continue with another keen downward trend. In early February, the flagship cryptocurrency seemed to be in free fall, even breaking above significant psychological price levels after its collapse.
One of these levels is the cost basis of one of the most influential cohorts of Bitcoin investors – Bitcoin ETF investors. Data from the latest on-chain evaluation shows that Bitcoin has since traded below this price and continues to see increasing interest from investors.
MVRV drops below 1 – what does that mean?
Market analyst PelinayPA recently turned to QuickTake to reveal that Bitcoin’s price is trending below the average realized price of Bitcoin ETFs and what the possible ramifications of this market setup are.
It is worth noting that the MVRV (Market Value to Realized Value) ETF index also dropped below 1, which deepens the anxiety of most ETF investors. Historically, a sustained move below an MVRV of 1 signals increasing stressed conditions in the BTC market because it reflects the overwhelming dominance of unrealized losses among the investor group.
According to PelinayPA, this condition may result in increased selling pressure as market participants become increasingly guided by emotions when making transactions in the market. Therefore, short-term attempts at economic recovery are likely to be met with significant resistance (as is currently the case) until the situation improves. This is because investors who entered the market at higher price levels would likely exit their positions at breakeven or even with minimal losses to avoid deep losses.
Since the realized price of Bitcoin ETFs is around $80,000, this price area could act as a robust resistance level if Bitcoin’s price tries to rebound. PelinayPA explains that if the MVRV stabilizes in the 0.8-0.9 range, it may indicate that the current bear pressure is approaching the point of exhaustion; a scenario that may precede a short-term rebound towards the realized price.
On the other hand, if MVRV continues to decline (as analysts expect), this could be problematic for Bitcoin’s price. This is because ETFs would come under significant pressure, which could trigger sell-offs in this cohort of investors. This, in turn, would boost downward pressure and cause prices to fall further, especially in the longer term.
Bitcoin market overview
As of this writing, Bitcoin is trading at $68,000, up 1.58% in 24 hours, according to CoinMarketCap data. For SoSoValue dataBitcoin ETFs saw total net outflows of approximately $1.08 billion in February. This comes after an even more staggering net payout in January of $1.61 billion.
