Bitcoin at Risk of Further Decline Based on Key Metrics: CryptoQuant Data

Bitcoin is currently experiencing a price correction that has led the asset to hover around crucial support levels, potentially signaling more challenges for the market. Analysts at CryptoQuant have observed that the cryptocurrency has breached a significant resistance level in this bullish cycle, with on-chain metrics not indicating an imminent recovery.

In their latest weekly report, it was noted that BTC has dropped below the lower band of traders’ realized prices for the first time in this bull run. Historically, this level has served as a supportive barrier during this cycle. However, if this support falters, there is a risk of the cryptocurrency plunging to the $40,000 mark, which represents the minimum band for traders’ realized prices.

Despite concerns about the support level, analysts remain cautiously optimistic, suggesting that the likelihood of it failing is low, as its breakdown would imply a shift into a bear market phase.

Looking ahead, there are indications of a potential further correction in the market. Metrics from the futures market and a decrease in bitcoin demand from traders suggest that BTC could extend its current correction, leading to more significant losses. Notably, trading activities in futures markets have been dominated by selling and shorting transactions, with investors displaying a preference for opening short positions over long positions, as evidenced by negative funding rates.

Moreover, bitcoin traders have been reducing their holdings since late May, reflecting a continuous decline in demand for BTC from this segment of market participants.

The recent decline in bitcoin’s price has also impacted traders’ profit margins, pushing them to the most negative levels since November 2022. This lack of positive momentum is further underscored by the on-chain profit margin, which currently stands at 18%. Typically, positive price momentum occurs when the profit margin rises above zero and remains higher than its 30-day moving average.

From a valuation perspective, bitcoin’s market value to realized value (MVRV) ratio has dropped below its 365-day moving average. Historically, such a move has been associated with either a prolonged price decline or the beginning of a bear market.

In conclusion, investors are advised to monitor these valuation metrics closely to gauge the potential for a price rebound if the MVRV surpasses its 365-day moving average or the likelihood of a further correction in the market.