Bitcoin is experiencing a weekly sell-off that has reignited discussions about a potential local bottom. Chris Kuiper, CFA and VP of Research at Fidelity Digital Assets, has observed that several on-chain metrics and sentiment gauges bear similarities to prior bull market corrections, while also acknowledging that absolute certainty in market analysis is elusive.
On-Chain Metrics Signal Potential Bottom
Kuiper has highlighted the Short-Term Holder MVRV metric in conjunction with the cost basis. He shared a chart from Glassnode that compares Bitcoin's price with the realized price of short-term holders (STH) and their MVRV ratio. This metric indicates whether STHs are currently in profit or loss. Historically, prior uptrends have often seen local lows form when the STH MVRV has dipped below 1, signaling that recent buyers were briefly in loss before the price recovered.
Short-Term Holders Under Pressure
Kuiper's analysis indicates that the current drawdown is pushing short-term holders into loss territory, a pattern reminiscent of earlier mid-cycle retracements. He points out that a pullback of 20-30% within a bullish environment typically creates a similar valley on the MVRV chart, where STHs absorb pressure before momentum can reset.
Another significant indicator is the Bitcoin Fear & Greed Index, which has transitioned from extended periods of "greed" and "extreme greed" to readings of "fear" and "extreme fear." Kuiper emphasizes that this index tends to reach extreme zones near both local tops and bottoms. The current reading of 11 suggests a sharp emotional reset following prolonged optimism.
Kuiper clarifies that his analysis presents probabilities rather than definitive forecasts. He stresses that there have been no adverse fundamental shifts observed in recent weeks. Instead, he argues that the recent data suggests a healthy corrective phase within a broader upward trend.
The information presented in this article is for informational purposes only and should not be interpreted as investment advice. The cryptocurrency market is highly volatile and may involve significant risks. We recommend conducting your own analysis.