On Tuesday (May 23), the price of Bitcoin (BTC) has been trading sideways for quite some time as its volatility remains low. This has sparked fear among many investors as they expect BTC to continue its first quarter performance in the second quarter.
However, recent analysis by CryptoQuant points to a number of factors that suggest a price rally could be in the works. So the big question for investors is can Bitcoin now finally break out of its sideways path?
Bitcoin ‘truces’ ahead of bull rally
CryptoQuant author and analyst MAC_D pointed out many factors that indicate an upward trend. By observing different blockchain cycle indicators such as MVRV (market value to realized value ratio) and SORP (short-term holders to long-term holders ratio), it can be found that the current recession phase means a recovery phase. Therefore, in the long run, it can be considered that the price of Bitcoin has a more upward trend.
MVRV is a measure of Bitcoin's market value relative to its actual value. If MVRV is low, it means Bitcoin is undervalued and may have room to rise. SORP is the ratio between short-term holders and long-term holders, which can reflect market sentiment and investor behavior. If SORP is below 1, it means that long-term holders dominate the market, which is generally seen as a positive sign.
In addition, the intrinsic value of Bitcoin has also increased. According to the analysis, there has been a trend of adjustment recently, but this seems to be a short-term phenomenon caused by overheating of the network.
Overall, based on the hashrate and difficulty of Bitcoin (BTC), the overall indication is that Bitcoin's blockchain is actually growing. The analysis also mentioned that Bitcoin's price is close to BTC's 1 million to 3 million realized price-UTXO age band. Here, UTXO refers to unused transaction outputs, and the realized price-UTXO age band refers to the price band determined by the average age of Bitcoin's transaction outputs in different price ranges. By observing that Bitcoin's price is near this price band, it can be inferred that short-term holders in the market have played a key supporting role in the price adjustment.
It is worth noting that during the last recovery period, the average unit price of these short-term holders became a key support line for price adjustments. This increases the possibility of price increases in the coming days.
Should holders be excited?
To get a better idea of what’s actually going on with Bitcoin (BTC), let’s take a look at Bitcoin’s other blockchain indicators to determine if BTC is poised for a bull run.
According to data from CryptoQuant, Bitcoin's exchange reserves are increasing, indicating that Bitcoin is facing selling pressure. Exchange reserves refer to the amount of Bitcoin stored in exchange accounts. If exchange reserves increase, it means that more Bitcoin is stored in exchanges, and there may be selling pressure because holders of exchange accounts can more easily sell Bitcoin.
In addition, the aSORP indicator of Bitcoin is red, which means that more investors are selling Bitcoin at a profit. The aSORP indicator reflects the profit situation of the holders. When aSORP is red, it means that the holders are more inclined to sell Bitcoin at a profitable price.
However, in the current situation, the active buy/sell ratio of Bitcoin (BTC) is in the green, indicating that buying sentiment is dominant in the market. In addition, Bitcoin’s funding rate is also good, which is an encouraging sign.
Interestingly, the Fear and Greed Index for Bitcoin is in a neutral position. This neutral state is ambiguous as it indicates that the price of Bitcoin could go in either direction in the short term.
Market indicators are bullish
Data from the Bitcoin price exponential moving average (EMA) bands shows that the distance between the 20-day and 55-day EMAs is narrowing, which increases the likelihood of a bullish crossover.
Bitcoin’s Chaikin Money Flow (CMF) has also seen an uptick, and the Money Flow Index (MFI) has also grown. The Relative Strength Index (RSI) is well above neutral levels, further increasing the likelihood of a price rally.
