Bitcoin fell to a low of $40,200 on Monday after experiencing strong gains in recent weeks, indicating a potential period of weakness. Data analytics company Glassnode also reported several indicators suggesting a recent softening in the market.
The Mayer Multiple indicator is approaching a resistance point, indicating that the price may be overvalued compared to the 200-day moving average. The 200-day moving average is often seen as an indicator of a bull or bear market and can also be used to evaluate overbought or oversold conditions. Historical data shows that overbought and oversold conditions are consistent with Mayer Multiple values above 2.4 or below 0.8. The current value of the Mayer Multiple is 1.47, which suggests that Bitcoin may face resistance at levels close to 1.5. It has been 33.5 months since the resistance point was last broken during the 2021-22 bear market, making it the longest period since the 2013-2016 bear market.
The NVT premium, based on the market cap/trading volume ratio, indicates whether investors are positioning themselves with a premium Bitcoin price. Glassnode’s model uses the relatively stable 90-day NVT price as a spot price reference. The NVT premium has seen one of the most significant surges since the market peak in November 2021, indicating a potential overvaluation compared to the trading volume.
Short-term holders (STH) can be observed by analyzing the supply of tokens that have been profitable for STH in the past 30 and 90 days. Historical data of profitable token supply for STH shows that a new all-time high rebound occurs when the supply of profitable tokens for STH in the past 90 days exceeds 2 million bitcoins. While the supply of profitable tokens for STH in the past 30 days has increased recently, there hasn’t been much fluctuation in the supply of profitable tokens for STH in the past 90 days, indicating a lack of strong STH foundation.
Analyzing the STH – supply profit/loss ratio reveals the proportion of realized profits and losses for STH. Ratios above 20 are consistent with market overheating, while ratios around 0.05 are consistent with oversold conditions. Ratios around 1.0 indicate a balanced profit/loss and alignment with the current market trend’s support/resistance levels. Since January, the STH – supply profit/loss ratio has mostly been above 1, with multiple instances of support and resistance at this level, suggesting a “buy on dips” behavior consistent with historical patterns.
In summary, Bitcoin’s recent strength has encountered resistance, with multiple indicators suggesting a potential period of weakness. The Mayer Multiple, NVT premium, and STH analysis all indicate certain factors contributing to this potential softening in the market.