April 19, 2024
Bitcoin Market Flagged as 'High Risk' by Glassnode's On-Chain Metrics
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Bitcoin Market Flagged as ‘High Risk’ by Glassnode’s On-Chain Metrics

Recent analysis from crypto analytics platform Glassnode indicates that key on-chain indicators assessing Bitcoin’s value have entered a “high-risk” zone, potentially signalling the early stages of a bull market for the cryptocurrency.

In a post shared on February 10, Glassnode revealed that one such indicator, the long-term holder market value to realized value (MVRV) indicator, has surpassed the “mid-risk” zone and firmly entered the “high-risk” band. According to Glassnode, this level of risk is often associated with the initial phases of a Bitcoin bull market, indicating that long-term investors have returned to a “meaningful level” of profitability.

The MVRV indicator is designed to gauge whether Bitcoin is over or undervalued relative to its “fair value” by contrasting its market value with its realized value – the price at which Bitcoin was transferred between long-term holder wallets. By filtering out short-term market sentiment, the MVRV provides insight into whether the market is overheated.

Glassnode assigned high or very high-risk ratings to seven out of ten indicators, including MVRV, supply profitability state, and net unrealized profit/loss. This suggests that despite significant increases in crypto asset prices, there are relatively low levels of realized profit locked in by investors.

The analysis also highlighted that demand for Bitcoin block space and short-term profit-taking by new investors were categorized as “low risk.” Glassnode further noted that the sell-off following the approval of spot Bitcoin exchange-traded funds (ETFs) in the United States had reduced risk throughout the broader market.

Bitcoin’s price has shown steady growth over the past week, rising from $42,317 on February 4 to $48,582 at the time of publication, as reported by CoinGecko. This upward momentum has been attributed to decreasing outflows from the Grayscale Bitcoin Trust (GBTC), now converted into an ETF, along with substantial inflows totalling $9.1 billion into nine spot Bitcoin ETFs since their launch on January 11.

Data from the crypto analytics platform SoSoValue indicates that the new U.S. spot Bitcoin ETFs experienced net inflows of $541 million on February 9, marking the largest day of inflows for the products, excluding their first day of trading. Meanwhile, Grayscale’s GBTC witnessed its lowest day of outflows on February 9, with just $51.8 million exiting the fund, representing a significant decrease from its record daily outflow of $620 million on January 23.

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