Key Points
- Bitcoin (BTC) is potentially entering a beneficial buy zone, as indicated by two commonly used cryptocurrency metrics.
- Despite a recent upswing, Bitcoin’s open interest (OI) weighted funding rate remains lower than its early April level, suggesting a favorable market correction.
According to two prevalent indicators for monitoring on-chain trading activity, Bitcoin (BTC) might be stepping into a promising purchase area. These metrics, the market value to realized value (MVRV) and the open interest (OI) weighted funding rate, hint at an appealing entry point for traders.
A pseudonymous trader, known as Mister Crypto, suggested to his 94,100 followers in a recent post that this might be the optimal time to purchase Bitcoin. At the time of writing, Bitcoin’s price stands at $64,230.
Bitcoin’s OI Weighted Funding Rate
Bitcoin’s OI weighted funding rate, which denotes the cost of holding Bitcoin futures positions, entered positive territory on April 24, following a 24-hour stint in the negative zone, posting 0.0093% according to CoinGlass data.
Despite the recent rise, it is considerably lower than the 0.0714% observed at the start of April. Analysts view this correction as advantageous for the market. On-chain analyst Checkmate referred to this as one of the “healthiest market resets” seen in a long time. Kyle Doops, host of Crypto Banter, also saw this positively, stating that Bitcoin is ready for “liftoff.”
Indications of a Bullish Market
The elevated funding rates indicate an increased interest in long trades, reflecting a more bullish sentiment in the market. The last time Bitcoin’s OI weighted funding rate significantly peaked was in early March, when Bitcoin reached an all-time high of $69,200 on the same day. A week later, it exceeded that milestone, climbing to $73,835.
Charles Edwards, founder of the Capriole Investments fund, stated that while funding rates are a good indicator “broadly speaking,” they no longer carry the same level of certainty as they did a few years ago. Edwards noted that with more parties involved, it’s a more complex metric to consider.
The MVRV indicator, which aims to identify when Bitcoin is over or undervalued relative to its fair value, also suggests that Bitcoin has moved further into favorable buying conditions. Currently, Bitcoin’s MVRV score is 2.32, down 6.45% since the start of April.
An MVRV score above 3.5 suggests that the market is nearing its peak, whereas a score below 1 suggests that the market has bottomed out. Edwards pointed out that the current MVRV levels indicate “we’ve got quite a bit of leeway over the next year.” However, he also noted that the current buying opportunity is not as lucrative as those available just a couple of years ago.