- After an extraordinary eight-week price increase, Bitcoin appears to be going through a consolidation and profit-taking period.
- According to data, various significant BTC transactions have occurred on crypto exchanges in the last few days, suggesting that some whale addresses may be joining the sell-off.
- Looking at historical trends, there has been a period of 14 to 20 months between the creation of the realized price and the all-time high.
Bitcoin price is trading above fair value, according to on-chain analytics firm reviews: What could this mean?
Bitcoin Fair Value Metric Review from Glassnode
Bitcoin appears to be going through a period of consolidation and profit-taking after eight weeks of extraordinary price growth. The world’s largest crypto has seen incredible growth this year, with a particular spike in mid-October.
However, after reaching the yearly high of $44,500 on December 8, it is observed that there is about a 6% pullback to $44,500, indicating that some investors are trying to realize profits. According to several on-chain price models provided by data provider Glassnode, Bitcoin’s current fair value is currently between $30,000 and $36,000.
The on-chain fair value models by Glassnode suggest an inevitable short-term correction. Analyses based on investor cost basis and network consumption indicate that the current market rally is behind the fair price. One benchmark taken is the Realized Price Based on Open Interest, which tracks the degree of HODLing on the network. According to this model, Bitcoin’s spot prices are currently trading above the realized price (fair value).
Looking at historical trends, there has been a period of 14 to 20 months between the creation of the realized price and the all-time high. The path to creating a new ATH has always involved significant spot price fluctuations of around 50% around the Realized Price Based on Open Interest.
The crypto asset has now surpassed 11 months within this range, and spot prices fluctuate between 38% and 21% above the realized price. If history repeats itself, we may see fluctuations around the current fair value of $36,000 in the coming months.
This price point aligns with a post shared by a crypto analyst on social media. Referring to IntoTheBlock data, the analyst mentioned a strong support where 1.52 million addresses holding 534,000 BTC between $37,150 and $38,360. Another technical pricing model quoted by Glassnode is the Mayer Multiple. The Mayer Multiple indicator currently has a value of 1.47, close to the resistance level of 1.5 created in previous bull cycles.
Glassnode’s report also looked at various other pricing models, including the NVT Premium indicator. According to NVT Premium, the recent rally marks one of the largest increases seen in Bitcoin since the all-time high in November 2021, suggesting overvaluation in terms of network consumption.
What’s Next for Bitcoin?
At the time of writing, Bitcoin is trading at $41,210. Although the crypto is currently experiencing a 6% weekly decline, it has observed an 8.5% gain since the December opening at $37,731. The $44,500 level is currently a critical level for the asset and is significant for the industry, which continues to await a bullish run following the approval of spot Bitcoin ETFs in the U.S.
The crypto market is still in a bullish sentiment, and the Fear and Greed Index, at 73, signals greed. A move above $44,500 would indicate a resumption of the bullish trend for Bitcoin. Another resistance level to watch after the breakout is $46,400.
