Although Bitcoin’s price is yet to reclaim its March all-time high, an analyst claims two key metrics show that the bull market remains strong and steady with no signs of a deep correction.
In an Aug. 18 report, CryptoQuant researcher Axel Adler looked to two key metrics — the bubble vs. crush market structure and the ratio between the difference of market cap and realized cap and the standard deviation of market cap (MVRV-Z score) — as signals that Bitcoin’s current price action is tracking a healthy path forward.
“We can see that the current bull cycle is developing quite steadily without significant anomalies or sharp jumps,” Adler added.
Bitcoin’s bubble vs. crush market structure score indicates no bubble
Adler highlighted that the bubble vs. crush market structure has dropped to a score of 1.02, which he considers “the baseline,” suggesting that Bitcoin is not currently experiencing a bubble.
Bubbles form in the market when Bitcoin’s market capitalization “grows faster” than its realized capitalization. When Bitcoin hit its all-time high of $73,679, the indicator was signaling a bubble, with a score of around 1.5.
Less than a week later, the price plummeted 16% to $61,930, according to CoinMarketCap data.
Bitcoin is still struggling to hold onto the key $60,000 level that traders have been looking to as a pivotal point in recent times. Since July 22, Bitcoin has been trading in a 40% range, oscillating between a low of $49,842 and a high of $69,799.
At the time of publication, Bitcoin is trading at $59,236.
Adler also noted that Bitcoin’s 30-day moving average (MA) MVRV-Z score is at 1.8, slightly over BTC’s annual average of 1.6, which suggests “minimal overvaluation.”
When the 30-day MA MVRV Z-score surges, it can be an indicator to traders that the asset is overvalued and a price correction may be coming.
In March 2021, Bitcoin’s 30-day MA MVRV-Z score reached above five before Bitcoin reached a high of $60,701. But, just three months later BTC declined 45% to $32,827 by July.
Both bubble vs. crush and the MVRV-Z score are metrics used to gauge whether or not Bitcoin could be considered “overvalued.”
“As long as the metric does not reach extreme levels that could signal a significant risk of correction, the market can be considered bullish,” Adler added.
Several traders have been commenting on Bitcoin’s extended consolidation in recent times.
“We are in the boring phase. This phase happens before and after the halving,” pseudonymous crypto trader Ash Crypto wrote in an Aug. 20 X post.
Meanwhile, pseudonymous crypto trader Rekt Capital added that Bitcoin is “on the cusp of reclaiming its Post-Halving ReAccumulation Range,” suggesting that Bitcoin could move higher in the coming months.
