Bitcoin Crash Below $70,000 But One Indicator Screams “Buy”

The Bitcoin price took a big hit in recent hours and even briefly dipped below the 70,000 dollar mark. Still, new on-chain data shows that the long-term picture may be less negative than the short-term price action suggests.

According to an analysis by blockchain platform Santiment, an important indicator, the so-called 365-day MVRV ratio, is currently deep in a zone that is historically often seen as promising for long-term investors.

What exactly is the MVRV ratio?

The MVRV ratio compares two important quantities:

• Market value: the total value of all Bitcoin based on the current price
• Realized value: the price at which coins last moved on the blockchain

Comparing the two provides a picture of the average profit or loss level of investors.

• If the ratio is above 1, investors are on average making a profit.
• If the ratio is below 1, unrealized losses dominate.

Short-term investors still in the plus

The data shows that recent buyers, investors who hold Bitcoin for about a month, are still slightly ahead of the curve. Their MVRV value is around +7 percent, which means they could theoretically be inclined to take profits.

That could explain the recent price pressure and the rapid decline towards $70,000.

Long-term holders in ‘opportunity zone’

For investors who have been holding Bitcoin for about a year, the picture looks different. Their MVRV ratio is currently around -22 percent, which means that on average they are still well underwater.

Historically, this is a zone where the market is often closer to a bottom than a top. When a large proportion of investors with a longer time horizon suffer losses, selling pressure generally decreases and space is created for longer-term recovery.

What does this mean for the coming months?

The combination of a sharp decline in the Bitcoin price in the short term and relatively weak returns in the longer term paints a typical picture of a market in a consolidation phase.

• In the short term, volatility may remain high due to profit-taking and macro uncertainty.
• In the longer term, the fact that many hodlers are making losses can actually form a foundation for a new upward trend.

Whether that scenario becomes reality depends largely on factors such as liquidity, monetary policy and geopolitical developments. The Iran war is particularly important in this regard. This must be over soon to give Bitcoin breathing space.

For now, however, the MVRV indicator shows that the recent decline does not automatically mean that the broader bullish narrative surrounding Bitcoin has disappeared.