Last week was the start of a bull market for Bitcoin. Still, as prices went up, some momentum indicators showed that bitcoin could be overvalued in the short term and that a correction could be on the way.
Bitcoin is priced too high
The P&L index data from CryptoQuant showed that the bitcoin bull market started last week. This was demonstrated by the index moving above its 365-day moving average. Also, the bull/bear market cycle shows the market is in the Bull stage.
Using the MVRV ratio, the LTH/STH SOPR, and the NUPL, the company also made a single indicator for how much bitcoin is worth. When the needle is above 1, which is the red line, it shows that bitcoin is overpriced. On the other hand, it is in the green below -1.38, which means the price is too low. It is undervalued right now because it is below -1.38.
But bitcoin’s price could decrease if it becomes too expensive in the short term. Most of the time, it’s because the price went up quickly in a short amount of time.
Miners are paid too much
Due to the increased difficulty, the higher price of BTC has caused miners to pay too much. When mining income grows faster than mining difficulty in a short time, it’s usually a sign that the price might go down.
Since November 2021, the 5% profit margin on coins held for less than a year is the highest it has been since then. This kind of spending at a high profit usually means a price correction is coming.
But people who own many bitcoins have kept most of them despite the recent price rise. In the same way, people who have been holding their coins for a long time have not moved them in the last six months or so.
Bitcoin dropped in 24 hours
Bitcoin lost 0.84% in 24 hours to $23,652. BTC is approaching $23,000 after reversing the bull progress overnight. Today, BTC/USD fell to $23,329.
Yesterday, it crossed $24,000, but macro market instability prevented purchasers from keeping up.
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