While the cryptocurrency market is as volatile as ever, data continues to pour in, suggesting prices will rebound soon. An analyst has now provided evidence that Bitcoin has fallen into a value zone it hasn't seen in the past eleven years.
If correct, there is now a brief window that puts the price of Bitcoin at a significant discount.
Analyst Philip Swift created a chart that analyzes the current market capitalization and how a particular bitcoin moves relative to its price at the time of purchase. Known as the MVRV Z-score, it shows that traders are currently selling bitcoin at a deep discount.
Philip Swift posted a tweet on Twitter: From the MVRV Z data, the Bitcoin market cap has now fallen below its cost ceiling (the cost basis for buying Bitcoin), and the Z score is now in the green zone. Historically, such periods are rare and attractive for accumulating Bitcoin.
In short, Bitcoin holders are selling for far less than usual, and whenever this happens, Bitcoin sees a substantial price rally.
Others have also noticed the trend that current holders are selling at deep discounts. CoinMetrics.io notes that the rate at which Bitcoin is being sold at a loss is now at an eight-year high.
CoinMetrics official Twitter said that Bitcoin SOPR fell to 0.843 on March 12, the lowest level since February 2012. SOPR is the ratio of the selling price to the price paid, with an SOPR below 1 indicating that investors are selling at a loss.
There are a number of reasons for such a swift sell-off. Surrounding the turmoil in the traditional financial sector, many crises have emerged. Additionally, many cryptocurrency investors need cash as jobs are shutting down around the world due to the impact of the coronavirus.
Therefore, they cash out (pocket assets) a large amount of Bitcoin. This need for fast paper money is further evidenced by increased activity on Localbitcoins.com.
Demand for cash is strong as the virus creates a financial crisis-like market environment. While there is no shortage of desire to buy cryptocurrencies, fewer people have the capital to invest.
This situation also further creates a great opportunity to buy blockchain assets at a discount.
In this particular case, huge price swings are likely across all commodity markets in the coming days and weeks. In the cryptocurrency space, there is no shortage of whales cashing in on volatility. But in the meantime, prudent and steady buying remains the best strategy for most investors.
The original text comes from bitcoinist, compiled by the BluemountainLabs team, the English copyright belongs to the original author, please contact the editor for Chinese reprint.
The original text comes from bitcoinist, compiled by the BluemountainLabs team, the English copyright belongs to the original author, please contact the editor for Chinese reprint.
