Following the sharp decline in Bitcoin, the leading cryptocurrency, in recent months, some indicators suggest that the market is approaching the lows seen in past bear markets.
According to Brett Munster, a Blockforce Capital executive who has previously called for sell-offs during three different bull and bear cycles, the current sell-off may be entering its final phase.
Noting that Bitcoin has lost approximately half its value since October, Munster tracks four key indicators to understand where the asset is in its downtrend cycle. One of these indicators has already entered the region associated with past market lows. The other two indicators intersect between $54,000 and $58,000. These levels are below Bitcoin’s current price, which is trading around $71,800. Bitcoin, which briefly fell to $60,000 in February, appears to have already touched the upper limit of its potential bottom region, according to Munster.
Munster argues that the difference between the current price and the levels at which other indicators will be triggered does not pose a significant risk for investors. Recalling that in the previous bear market, there wasn’t a huge difference for long-term investors between buying Bitcoin at $19,000 and buying it at the ultimate low of $15,600, the analyst suggests making gradual purchases instead of waiting for a single perfect entry level.
According to the analyst, while it’s impossible to pinpoint a definitive bottom, much of the decline may be behind us. Munster stated that the market could show signs of recovery towards the middle of the year.
According to the analyst, one of the indicators giving a bottom signal is the metric known as MVRV Z-Score. This indicator measures whether Bitcoin is overvalued or undervalued based on its average on-chain cost. Historically, a drop below 0.4 indicates that Bitcoin is generally trading in the undervalued region. The current data is around 0.38.
Other key indicators have not yet reached this region. The “actual price,” representing the average purchase price on the chain, is currently around $54,000, while the 200-week moving average, which has acted as significant support in past cycles, is around $58,000. Furthermore, the decreasing rate of decline between the peak and the trough in each cycle suggests that the potential bottom could be between $45,000 and $55,000.
Taking all this data together, Munster believes that a “high probability accumulation zone” has formed for Bitcoin, approximately between $45,000 and $60,000.
*This is not investment advice.
