Will ‘Bitcoin catharsis’ end soon? This alpha factor might be key
The current bear market calls for the skills of ‘Tsujigiri.’ Well, if you are an investor or a trader thinking ‘Life’s but a walking shadow,’ then acquaint thyself with celebrated American investor Jim Rogers’ belief –
“Bottoms in the investment world don’t end with four-year lows, they end with 10-15 year lows.”
Now, this quote might feel like a minor myocardial infarction. However, know that Bitcoin holders needn’t really worry as positive sentiments are in the king coin’s territory. It’s important to note here that sentiments rule the trading world.
And, you ask, how can someone measure that. Well, the ‘social dominance’ on-chain metric can reveal a lot about traders’ stress per unit of profit and the overall sentiment across the market.
Bowling in the deep
Interestingly enough, for most of the last two years, the market has seen BTC’s social dominance value well below 20% as the altcoin craze was in full swing. But, surprisingly, Bitcoin’s social dominance is above 25% this week.
It is indicative of the fact that the crypto-crowd is having a “healthy” outlook on Bitcoin in general. Moreover, it clearly goes on to reflect that over one-quarter of all discussions in crypto-forums have been related to the king coin, rather than altcoins or stablecoins.
At this point, it wouldn’t be a fool’s question to ask how positional traders can benefit from this metric’s reading. One doesn’t need to ‘go figure!’ Taking a look at weighted sentiment should suffice.
The negative sentiment post 6 June has recovered. It currently is at the -0.069 mark. Its chances of moving to the positive zone look nil at the moment. Positional traders willing to go short can capitalize on this opportunity.
However, traders seeking validation from whales would be happy to know – according to a data platform Tokenview – Bitcoin’s third-largest whale increased its holdings of 565 BTC on 23 June. The address currently holds a total of 129,936.54 BTC, with a total value of about $2.6 billion. This, when the overall market is treating the $20k+ level as psychological support currently.
Here’s a painful reminder – The king coin hit its most recent local bottom at $17.8k on 18 June. You can blame inflation, the FOMC-related rate hikes, COVID-19, or the Russia-Ukraine conflict.
That being said, the reading of the MVRV (30-D), however, induces a slight hope. At press time, the MVRV had recovered from its recent low of 18 June to halt at -13.17%. Even though the metric still states that BTC is undervalued on average. Here, it’s worth noting that this metric is aiming at a recovery.
Considering addresses that bought between $17,392.68 and $23,662.11, there are 1.28M addresses in the profit. However, only 826.63k addresses are ‘out of the money.’ This is surely not a disappointing figure.
Keeping all the tiny bullish factors for BTC in the fore, one can expect the ‘Bitcoin catharsis’ to end. But, let’s not forget that it might take a few years for it to happen.