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Bitcoin Trades Losing and ETH Oversold – What Next?

Bitcoin and ETH are currently trading at lower prices, but exchange Kraken believes the bull cycle is not over for the two largest digital assets by market cap.

In the January 2022 on-chain crypto report, Kraken to say Bitcoin’s Spent Output Profit Ratio (SOPR) and Market Value to Real (MVRV) Ethereum’s Z-Score shows that BTC and ETH are trading below their fair value, but the exchange also emphasizes resilience.

“Although BTC SOPR showed market participants mostly trading at a loss, the situation was much worse during Bitcoin’s recent bull run retracements from $65,000 to $30,000 (May 5) 2021 to July 2021 before settling to a new all-time high recovered.

Additionally, ETH’s MVRV Z-Score shows that the cryptocurrency is currently in the “oversold” territory, where it previously struggled and held for a long time before recovering.

The on-chain SOPR indicator determines whether bitcoin holders are selling at a profit or at a loss. If the SOPR is greater than 1, the holder sells at a profit and vice versa.

BTC’s SOPR shows bearish sentiment with a reading below 1, but Kraken says the index was worse last year when Bitcoin fell from $65,000 in May to $30,000 in July.

“If indicator 1 breaks and sustains above it, it could signal the end of the recent bull market correction. However, if the indicator stays below 1 while the price keeps falling, it could confirm that BTC has entered a bear cycle…

While SOPR is currently signaling a bearish bias, on-chain data painted a much worse picture during the recent similar market correction, after which BTC rallied strongly. In other words, don’t get rid of it.”

The MVRV Z-Score also shows a bullish outlook for ETH. This metric is used to measure profitability in the market based on whether the price of an asset sold is above or below its fair value. Above 5 means ETH has either been overbought or sold above fair value. Below 1 indicates the cryptocurrency is oversold or trading below fair value.

“As ETH is down -49% from its all-time high of $4,867 hit on 9/11/2021, MVRV-Z-Score falls into “oversold” territory. History shows that ETH’s MVRV-Z-Score tends to drop into “oversold” territory during retracements, but doesn’t stay in that zone long before the price reverses.

The last time ETH’s MVRV Z-Score dropped into this range was around the time of the Black Thursday market crash in March 2020. Although the asset and network activity are down, historical on-chain data shows that the ETH is not entirely gloomy. Market participants have accumulated “oversold” during the MVRV Z-Score.

ETH 4 hour chart | Source: Trade View

What’s Next for Bitcoin?

According to analyst Justin Bennett, the market will not collapse when everyone expects it.

bennett to speak that the bull market is still intact, but a correction is possible in a few months.

“I think the bull market is not over yet. The market doesn’t crash when everyone expects it. And that is the reality at the moment.

My base case is another unusual rally this year, then a correction in late 2022 or 2023.”

Bennett doubt sth The Federal Reserve (Fed) hiked interest rates and sharply scaled back asset purchases. Instead, they will “choose to stabilize the market rather than control inflation,” especially if the “stock market corrects further.”

The analyst predicts that volatility could increase if the Fed is forced to maintain its “adjustment mode”.

“That means we will see more volatility in the near term as stocks push the Fed to stay accommodative for longer. But in the end I think this bull market is not over yet. It’s going to be an interesting couple of months.”

In one MessagesBennett further noted that if Bitcoin manages to sustain above $35,000, it could rally to resistance between $40,000 and $42,000.

But if the top cryptocurrency falls below $35,000, the price could fall by almost 20%.

“For now, bitcoin’s problem remains above the $35,000 area. If successful, resistance lies at $40,000-42,000 and then $45,000-46,000.

On the other hand, a close below the $35,000 zone opens the door for a return to $30,000.”

Source: Trade View

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