Bitcoin (BTC) staged a remarkable recovery on Friday, witnessing a 4% gain, which led the leading cryptocurrency to retest the $74,000 resistance level that remained untouched for the past month.
However, even with this upward move, the cryptocurrency reached around $72,215, placing itself at the upper border of its current consolidation range.
Is Bitcoin’s Further Decline Ahead?
Analyst Sunny Mom of CryptoQuant points out that despite this recovery, Bitcoin has yet to set a clear bottom. He suggests that further price cuts could be on the way, as available chain data suggests the market is in a significant “stress test” phase.
Go to the data, Sunny determines There are several key factors that indicate the upcoming problems for Bitcoin. First, he refers to the 6-12 month group of investors who are about $100,000 under water due to the realized price (RP) concentration.
This means that many of these medium-term holders are losing money, which may continue to put downward pressure on prices until this imbalance is resolved.
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Sunny also highlights the MVRV (Market Value to Real Value) ratio of 1.2. This number is generally considered to be the “DCA (Dollar Averaging) Area” for “smart money”. However, a significant cyclical trough usually requires MVRV to be less than 1.0, indicating a state of surrender.
In addition, the importance long term holders (LTHs) cannot be overestimated. A stable price level usually requires that LTHs – those who have held positions for more than two years – make up more than 20% of the realized threshold.
At the moment, they are only about 15%, which indicates that the market does not need stable structural support for a strong recovery. He posits two possible ways for how Bitcoin could bottom out.
Two possible ways to find the true bottom
The first involves a “Black Hole” incident – a sudden accident that occurs forced liquidation among high-value investors. As painful as it may sound, Sunny believes that this scenario could lead to a faster establishment of a stable price level for Bitcoin, possibly within one to two months.
The second path, called “The Big Break,” involves institutions holding their positions and allowing Bitcoin to trade between $60,000 and $80,000 in the long term.
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The analyst claims that this will allow new investments in long-term assets to mature and set the stage for a downward process that could continue until late 2026 or early 2027.
While the market may be in a “Value Bottom” that favors it long-term dollar cost averagingSunny’s analysis shows that a true “Structural Bottom” has yet to form for Bitcoin. As a result, he noted that volatility is expected in the range of $60,000 to $70,000.
Featured image from OpenArt, chart from TradingView.com
