The recent rise of Bitcoin (BTC) may trigger a “market correction” if the price action ventures far beyond $33,000, warns recent research. This cautionary note was sounded in the latest edition of the weekly newsletter, "The Week On-Chain," published by analytics firm Glassnode.
According to the publication, speculative selling risk looms as short-term holders (STHs)—the more speculative segment of BTC investors—have garnered attention this year.
Short-term holders' collective cost basis seemed to form wider Bitcoin price support close to $26,000 recently. While this cost basis has been significant in recent weeks, Glassnode anticipates that the trend could reverse soon.
Analysts have pointed out levels at which speculators are expected to take profit collectively, by studying both short-term and long-term holder (LTH) activities. The market value to realized value (MVRV) metric, which compares the spot value of coins to the price at their last movement, was used for this analysis. This resulting number is a measure of profit or loss, which usually fluctuates around one, signifying a "breakeven" price.
The recent MVRV readings for short-term holders show a strong reaction at the break-even level of MVRV = 1. The ratio is currently at 1.12, suggesting that the short-term holder cohort is, on average, sitting on a 12% profit. Should BTC prices continue to climb, the STH-MVRV is expected to rise alongside it. Once it surpasses 1.2, the historical risk of profit-taking becomes a real concern.
Glassnode stated, “The risk of market corrections tend to rise when this metric exceeds levels of between 1.2 ($33.2k) and 1.4 ($38.7k), as investors come into increasingly large unrealized profits.”
The newsletter further discussed the idea that recent lows near $25,000 flushed out potential sellers. The spent output profit ratio (SOPR), which assesses the relative profitability of BTC moving on-chain, repeatedly indicated what Glassnode terms as “exhaustion” among sellers at or near that level. Seller exhaustion has been increasing since the end of 2022, following Bitcoin's multiyear lows in the aftermath of the FTX exchange debacle.
