- Bitcoin’s recent price correction could set the stage for a strong Q4 performance.
- Analysts believe the decline in key metrics indicates Bitcoin is undervalued.
- High open interest and expanding global liquidity are seen as positive signs.
Bitcoin’s price correction: Analysts see it as a setup for major Q4 gains.
Bitcoin Price Correction and Key Metrics Reset
Bitcoin (BTC) is currently trading 7% below its recent high of $66,508, achieved on September 27. Despite this downturn, some analysts are optimistic, interpreting this correction as a significant reset of key metrics. Chief crypto analyst at Real Vision, Jamie Coutts, highlighted that Bitcoin is near all-time highs, but its valuation metrics have significantly dropped from extreme overbought levels in March.
Valuation Metrics Indicate Undervaluation
The Market Value to Realized Value (MVRV) Z-score, which measures Bitcoin’s market value relative to its realized value, shows a substantial downgrade. Over the past three months, the MVRV Z-score was -116%, indicating Bitcoin is severely undervalued across multiple timeframes. It was also -94% over a two-year period and -107% over a four-year period. This suggests an extraordinary undervaluation in Bitcoin’s current market pricing.
Global Liquidity and Market Sentiments
An important market sentiment indicator, Bitcoin’s open interest (OI), remains robust. According to Coutts, the Perpetual futures OI has surged 800% in the past four years, reflecting high investor interest despite subdued funding rates. Additionally, global liquidity trends are accelerating upward, which is seen as a positive driver for Bitcoin’s potential price increase.
The Role of Global Liquidity in Bitcoin Pricing
Independent analyst Lyn Alden’s research reveals a strong historical correlation between Bitcoin’s price and global liquidity. Between May 2013 and July 2024, Bitcoin’s price demonstrated a correlation coefficient of 0.94 with global liquidity, indicating a strong positive relationship. This data suggests that increasing global liquidity could be essential for a substantial uptick in Bitcoin’s price.
Historical Performance and Future Outlook
Bitcoin’s performance in September 2024 was its best on record, closing 7.29% higher. This has triggered speculation among analysts and traders about Bitcoin’s performance in Q4 2024, which coincides with a Bitcoin halving and a US election year. Historical data implies that Bitcoin tends to perform weaker during US election years due to heightened uncertainties.
The Impact of Political Uncertainty
Analyst Timothy Peterson notes that US election years create volatility, which generally results in more conservative investor behavior. This leads to either muted or negative returns for Bitcoin. However, once election results are clear, market conditions stabilize, and Bitcoin often regains momentum in November and December as investor confidence returns.
Conclusion
In conclusion, despite recent price corrections, key metrics and expanding global liquidity suggest a positive outlook for Bitcoin in Q4 2024. Analysts are optimistic that, as political uncertainties resolve, Bitcoin could see significant gains, potentially benefiting from both market resets and favorable economic conditions.
