According to the crypto analysis platform Glassnode, on-chain indicators assessing Bitcoin’s value have entered a “high-risk” zone, indicating that the cryptocurrency may be in the early stages of a bull market.
In a post on Feb. 10, Glassnode shared that an indicator assessing Bitcoin’s long-term valuation relative to its market value has surpassed the “mid-risk” zone and firmly entered the “high-risk” band. This level is typically observed during the initial phases of a Bitcoin bull market, indicating that long-term investors have returned to a significant level of profitability.
The MVRV indicator compares Bitcoin’s market value with its realized value, which is the price at which Bitcoin was transferred between long-term holder wallets. By analyzing this contrast, the indicator aims to determine if Bitcoin is over or undervalued relative to its “fair value.” It filters out short-term market sentiment and provides insights into whether the market is overheated.
Glassnode assigned high or very high-risk ratings to seven out of ten indicators, including MVRV, supply profitability state, and net unrealized profit/loss. This suggests that despite significant increases in crypto asset prices, there are minimal levels of realized profit held by investors.
The demand for Bitcoin blockspace and short-term profit-taking by new investors were classified as “low risk” categories by Glassnode. Additionally, the recent approval of spot Bitcoin exchange-traded funds (ETFs) in the United States led to a sell-off, reducing risk across the broader market.
Bitcoin’s price has steadily risen over the past week, climbing from $42,317 on Feb. 4 to $48,582 at the time of publication. This increase has been attributed to decreasing outflows from the Grayscale Bitcoin Trust (GBTC) and substantial inflows into spot Bitcoin ETFs since their launch on Jan. 11.
Data from the crypto analytics platform SoSoValue shows that new U.S. spot Bitcoin ETFs generated significant net inflows, with the largest day of inflows recorded on Feb. 9. Meanwhile, Grayscale’s GBTC experienced its lowest day of outflows on the same date, marking a notable decrease from its previous record outflow.
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