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Analysis Suggests Now Is Best Time to Buy Bitcoin

24 Apr, 2024 Coin news

Analysis Suggests Now Is Best Time to Buy Bitcoin

Bitcoin might be entering a potentially lucrative buying phase according to two commonly used metrics that track on-chain trading activity by cryptocurrency analysts.

The market value to realized value (MVRV) and the open interest (OI) weighted funding rate metrics indicate that Bitcoin could be at an appealing entry point for traders.

“This is the best moment to buy Bitcoin,” stated Mister Crypto, a pseudonymous trader, to his 94,100 X followers in an April 23 post on X.

On April 24, Bitcoin's OI weighted funding rate, which measures the cost of maintaining Bitcoin futures positions, rose to positive levels at 0.0093% after spending 24 hours in negative territory, as reported by CoinGlass.

Though this represents an upturn, it remains considerably below the 0.0714% seen at the start of April, a drop that analysts believe is beneficial for the market.

“One of the healthiest market resets I have seen in a long time,” on-chain analyst Checkmate commented in an April 24 post.

“Rates holding strong. Bitcoin ready for liftoff,” added Kyle Doops, host of Crypto Banter, in an April 24 post.

Elevated funding rates indicate a growing interest in bullish trades, suggesting a more optimistic market outlook.

Previously, when Bitcoin’s OI-weighted funding rate last spiked significantly in early March, Bitcoin reached a record high of $69,200 on the same day.

A week later, on March 14, Bitcoin set another record by climbing to $73,835, according to CoinMarketCap.

Charles Edwards, founder of Capriole Investments fund, in a conversation with Cointelegraph, noted that although funding rates generally serve as a reliable indicator, their predictive accuracy has diminished compared to a few years ago.

“2018 through 2020 and 2021, that sort of three-year window, it wasn’t talked about much. It wasn’t understood, and it was a hundred percent hit rate metric, where if it went negative, it was almost a hundred percent guaranteed; if you went long, you would make money.”

Edwards added, however, that with “so many more parties involved, it’s a bit more of a complex metric to consider.”

Additionally, the MVRV indicator, which helps determine when Bitcoin is over or undervalued relative to its fair value, also points to more favorable purchasing conditions for Bitcoin.

At present, Bitcoin’s MVRV score is 2.32, having dropped by 6.45% since the beginning of April, as per LookIntoBitcoin.

An MVRV score above 3.5 usually means the market is nearing its peak, while a score below one suggests it has reached its lowest point.

Edwards remarked that the current MVRV levels show "we’ve got quite a bit of leeway over the next year.”

He further explained that the current buying opportunity, though not as substantial as those seen a year or two ago when values were significantly lower, does not indicate severe overvaluation, which would be signaled by a score of four, five, or six.

Sources:

https://cointelegraph.com/news/2-on-chain-metrics-suggest-bitcoin-best-moment-to-buy-say-traders

https://twitter.com/misterrcrypto/status/1782691630832914803

https://www.coinglass.com/currencies/BTC

https://twitter.com/_Checkmatey_/status/1783034015982956875

https://twitter.com/kyledoops/status/1783118973560864983

https://coinmarketcap.com/currencies/bitcoin/

https://www.lookintobitcoin.com/charts/mvrv-zscore/

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