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Bitcoin’s Market Correction Reflects Cooling Phase, But Low Stress Levels Indicate Bull Market Remains Strong
Bitcoin’s latest market correction from its 2024 all-time high (ATH) of over $108,000 reflects a cooling phase, but relatively low levels of investor stress indicate the bull market is far from over, according to a recent report by Glassnode.
Investor Stress Levels Remains Low
The report highlighted that the number of BTC held at an unrealized loss currently fluctuates between 2.0 and 3.5 million coins, which is well below the 4 million coins seen during the lows in mid-2024, signaling a less distressed market environment.
Comparison to Early Bear Markets
For comparison, early bear markets have historically recorded between 4 and 8 million coins underwater.
Short-Term Holders Contribute to Unrealized Losses
Glassnode’s data reveals that short-term holders concentrate on unrealized losses, with these investors acquiring Bitcoin within the past 155 days, often near the market peak.
Current Market Conditions
The spot price of $94,398, registered early in the day on Jan. 15, was 9.2% above the average short-term holder cost basis of $88,400, placing the market within the norms of a typical bull market but raising concerns about potential sell-offs if prices dip below this threshold.
Relative Unrealized Loss Metric
The Relative Unrealized Loss metric, which compares unrealized losses to market capitalization, also stands at approximately 4.3%. This percentage is notably lower than the peaks of over 10% during crises like the 2020 COVID-19 selloff or the 2021 China mining ban.
Evolving Market Conditions
Market Value to Realized Value (MVRV) Ratio
The MVRV ratio, an important measure of unrealized profit in the market, currently stands at 1.32, indicating that the average Bitcoin holder has a 32% unrealized profit.
Positive Sentiment
This metric suggests an underlying tone of positive sentiment despite the market’s pullback from euphoric highs.
Historical Analysis
The report noted historical analysis showing that MVRV peaks have diminished with each successive market cycle, reflecting Bitcoin’s increasing market maturity and reduced speculative intensity.
Refined MVRV Z-Score Model
To adapt to Bitcoin’s maturing market structure, Glassnode has refined its MVRV Z-Score model, employing a one-year rolling window. This updated approach captures near-term market dynamics more effectively and identifies key market phases and turning points.
Conclusion
Despite the current correction, Bitcoin’s market remains resilient, with a positive overall outlook. However, a sustained failure to regain upward momentum could intensify pressure on short-term holders.
FAQs
- What is the current market condition of Bitcoin? The market is currently in a cooling phase, but with low levels of investor stress, indicating the bull market is far from over.
- What is the current unrealized loss in the market? The number of BTC held at an unrealized loss fluctuates between 2.0 and 3.5 million coins, well below the 4 million coins seen during the lows in mid-2024.
- How does the MVRV ratio reflect the market sentiment? The MVRV ratio stands at 1.32, indicating a 32% unrealized profit and a positive underlying tone of sentiment.
- What is the current price of Bitcoin? As of press time, the price is $99,532.
- What are the implications of a sustained failure to regain upward momentum? A sustained failure to regain upward momentum could intensify pressure on short-term holders.
