Bitcoin fell nearly 20% over the weekend to a three-month low of $ 42,874 after a market-wide flash crash. The changing price movements gave way to panic selling and weak speculation. On the other hand, the admonitions “buy the dip” have taken over crypto-twitter.
At the time of writing, Bitcoin appears to have rebounded somewhat, back towards $ 50,400, posting a daily gain of more than 6%. One question, however, is whether this recovery is sustainable.
Difficult price movements
For most of November, Bitcoin hit a lower lows as the price is now nearly 27% below its all-time high (ATH) of $ 69,000. Bitcoin’s November trajectory showed that after each price decrease, there is a small price increase or consolidation and then a larger decrease.
Bitcoin price has fallen nearly 13% since November 16, then nearly 9% since November 22, followed by a massive flash crash on December 3 that pushed Bitcoin below $ 50,000. That price action begs the question of whether the most recent 6% rally is really a breakout or just another fakeout at the time of writing.
The recent drop also appears to be affecting the MVRV (Market Value to Real Value) ratio of Bitcoin, as the 30-day value is -8%, which shows that the average loss of all locations that just bought Bitcoin in the last month , is about 8%. Over the weekend, Bitcoin’s short-term MVRV fell -19.4% before recovering.
Although the 7-day MVRV rose rapidly as the price rallied, Bitcoin’s 365-day MVRV is still far from the “recovery zone”, implying a further correction from a macroeconomic perspective. However, there has been some growth lately.
Starting from a slide up to $ 42,874, addresses of 100-10,000 BTC have accumulated over 67,000 BTC, highlighting how whales buy dips to perfection.
The big question, however, is whether the recovery is really happening or there will be another slump.
First, the on-chain metrics and supply dynamics for Bitcoin are different this time around.
The decline already occurred in April with an increase in the inflow of foreign currency, which means that at the time of the correction there was a positive net inflow of coins into the exchange wallets. However, the situation is different now, so far we can still see outflows from major exchanges on a 30-day basis.
In addition, the trend risk accumulates in the red in April / May. Mainly because most address pools were distributing bitcoin at one time, as opposed to now when the trend is high, but that’s because most address pools have seen a sideways movement.
Therefore, while the overall trend offers some optimism, it is best to be careful until Bitcoin breaks the $ 54,000 mark. The short-term course of Bitcoin can also be influenced by external factors. One of them is the next release of US inflation data on December 10th and the monetary policy meeting of the US Federal Reserve (Fed) on December 14th.
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