The cryptocurrency market has experienced significant volatility in recent months, with the price of Bitcoin (BTC) falling from its new yearly high of $31,000 to its current trading price of $27,300. This pullback has left Bitcoin at a crossroads. , with traders waiting to see if the key support level of $27,000 will hold or be broken.
However, Bitcoin is known for its volatility and the movement of supply liquidity can provide valuable insight into market activity. In the first quarter of 2023, a supply liquidity block was identified in what appeared to be controlled by a single entity, which was named according to research and analysis firm Material Indicators.
Bitcoin Rally 2.0 on the horizon?
This entity managed to attract more offers to fuel a Bitcoin rally, and the liquidity movement of the offers became predictable over time. However, the game ended with a rug flip in the first week of March.
As of this writing, to Materials, there are indications that a similar entity may be active in the market again, with a supply liquidity movement similar to that seen in the first quarter. While there’s no way to know for sure if the Notorious BID is back, it looks like someone is using a large amount of chips to play a similar game.
One of the key differences between what was seen in the first quarter and what is being seen now is that the buy walls are changing in size. This could be a spread strategy, as the big buyer looks to push the price up to a higher spread range, and ultimately use those offers as exit liquidity.
According to the fire chart of the Material Indicator, there is a substantial supply wall situated just below the $26,000 mark. This wall of offers may have the potential to prevent a further fall in the price of Bitcoin shortly, but only if the support floor of $27,000 is broken. Despite this, Bitcoin’s current support level has held steady, indicating that there is a possibility of a bounce to higher levels. Therefore, it cannot be ruled out that the Bitcoin price could rally to higher levels.
BTC MVRV Hits 11-Month High
For Gaah, a researcher and analyst at the CryptoQuant Firm, the MVRV (Market Value to Realized Value) ratio is a key indicator of market sentiment and can provide valuable insight into investor behavior. The ratio is calculated by dividing Bitcoin’s market capitalization by its realized capitalization, which is the sum of the value of all Bitcoin transactions since they last moved on the chain.
When the MVRV ratio is in the green quadrant, below a value of 1.44, it is considered to be in the accumulation zone. This indicates that there is less selling pressure in the market as Bitcoin’s realized capitalization exceeds its market capitalization. In other words, investors are less motivated to sell their Bitcoin as they believe its true value is higher than its current market price.
Gaah notes that the MVRV ratio peaked at 0.82 in December 2022, when Bitcoin was still trading around $17,000. This is the same level the ratio reached in 2018, just before Bitcoin experienced a significant drop. in its value. However, Gaah believes that current market conditions are different and that the MVRV ratio is a reflection of the increasing institutional adoption of Bitcoin.
Featured Image from Unsplash, Chart from TradingView.com