After the sharp decline of Bitcoin, the leading cryptocurrency, in recent months, some indicators show that the market is approaching the lows of the past bear markets.
According to Brett Munster, an executive at Blockforce Capital, who has previously called for a sell-off in three different bull and bear periods, the current sell-off may be entering its final phase.
Noting that Bitcoin has lost nearly half of its value since October, Munster tracks four key indicators to understand where the asset stands during its bearish period. One of these indicators has already entered an area associated with past market lows. The other two indicators cut between $54,000 and $58,000. These levels are lower than Bitcoin’s current price, which is trading around $71,800. According to Munster, Bitcoin, which briefly fell below $60,000 in February, appears to have already reached the top of its potential bullish zone.
Munster claims that the difference between the current price and the levels at which other indicators occur does not pose a significant risk to investors. Noting that during the previous bear market there was not much difference for long-term investors between buying Bitcoin at $19,000 and buying it at the closing price of $15,600, the analyst suggests buying gradually rather than waiting for a perfect entry level.
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According to the analyst, although it is impossible to determine the exact bottom, most of the decline may be behind us. Munster said the market could show signs of recovery in the middle of the year.
According to the analyst, one of the indicators that gives a bearish signal is a metric called MVRV Z-Score. This indicator measures whether Bitcoin is overvalued or undervalued based on its average chain value. Historically, a drop below 0.4 suggests that Bitcoin is generally trading in an undervalued zone. Current data is about 0.38.
Other main indicators have not yet reached this region. The “real price”, which represents the average purchase price in the chain, is currently around $54,000, while the 200-week moving average, which has acted as significant support in previous periods, is around $58,000. Furthermore, the decrease in the rate of decline between the peak and the low in each period suggests that the possible bottom may be between $45,000 and $55,000.
Taking all of this information into account, Munster believes that the “high probability accumulation zone” for Bitcoin is around $45,000 to $60,000.
*This is not investment advice.
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