Bitcoin prices crashed on July 4 before plunging again a day later. However, by the end of the day on Friday, the bar was left with a long lower wick as demand spilled over into the weekend. As BTC prices stabilizeThere could be signs that the downtrend is over, but not according to this analyst.
Bitcoin Remains Under Huge Selling Pressure: Here’s Why
Citing on-chain data, the analyst said The downtrend continues and sellers have the upper hand. Referring to the Bitcoin MVRV Momentum indicator, the trader noted that the reading is in negative territory for the first time in over 16 months.
The last time this happened was in March 2023. While prices recovered a few months after stalling in early Q3 2023 before taking off in Q4 2024, it remains to be seen whether the current formation will follow this scenario.
The Bitcoin MVRV Momentum indicator is a technical tool. It draws its data from on-chain readings, comparing the market value to the realized value of BTC. These two readings are often used to gauge the overall market sentiment.
When the indicator moves above the 1-year moving average, Bitcoin prices tend to rise. The chart shows that when prices were surging above $70,000 to reach $73,800, the indicator was firmly above the moving average.
The indicator is below the moving average at press time, suggesting general weakness. If this trend continues, this could mean that The market is moving lower after overheating in the first half of the year.
Yet, reading the chart and especially considering the March 2023 rally, when the same scenario was published, investors are faced with a dilemma. The indicator suggests market weakness, which allows buyers to double down on their efforts.
At the same time, the break of the 12-month moving average could mean that bears are getting a move on and more losses could be in store.
Should BTC Traders Be Patient?
The current situation requires traders to be patient and watch the market closely. So far, when BTC prices fell last week, they became more attractive to sell, fueling the downward momentum.
This, in turn, presented an opportunity for buyers to buy back at a discount, thereby forcing a short squeeze and liquidating leveraged sellers in the process.
It remains to be seen whether leveraged traders will capitulate and exit after the gains of the last 48 hours. However, one on-chain analyst Remarks Unrealized losses for short-term holders (STHs) remain high. If prices fall and STHs panic sell, it could trigger a rapid price collapse.
Main image from Canva, chart from TradingView
