• Multiple indicators suggest that investor appetite for Bitcoin has resumed.
• Open Interest and MVRV ratio are both attempting to recover above 1, signaling a potential uptrend.
• However, there is still a risk of potential downside due to the Digital Currency Group (DCG) and Genesis solvency issues, and the Purpose Bitcoin ETF’s holdings offloading BTC.
The crypto market has been on a rollercoaster ride for the past few months, with Bitcoin leading the charge. Since the start of 2021, the leading crypto asset has seen a meteoric rise in its price, which has been accompanied by a surge in investor appetite. This has been confirmed by multiple indicators, with many pointing to the start of a new bull run.
CryptoQuant’s analysis on 19 January highlighted a few key observations. The most important being the shift of BTC holders from spot to the derivatives market in order to leverage their holdings. This observation was further confirmed by the rise in Open Interest since the start of the year. The estimated leverage ratio dropped off in the first half of the month, but was beginning to rally again at press time.
The CryptoQuant analysis also looked at the MVRV ratio which is a good indicator of the start of a new uptrend. At press time, Bitcoin’s MVRV ratio was attempting to recover above 1, signaling an increase in investor appetite. The Puell multiple also showed a similar shift in favor of the positive trend.
However, the analysis also pointed out that there was still a significant risk of potential downside at press time. This is mainly due to the issues surrounding the Digital Currency Group (DCG) and Genesis solvency, and the Purpose Bitcoin ETF’s holdings offloading BTC. These issues could potentially trigger another major selloff, eroding BTC’s latest gains.
Overall, although the indicators suggest that investor appetite for Bitcoin has resumed, there is still a risk of potential downside. Investors need to be aware of these risks and make sure to conduct their own research before investing in Bitcoin.