Originally published on: November 20, 2024
Bitcoin’s price may be headed for a crash, according to onchain data service CryptoQuant. They have identified five key warning signs that investors should be aware of to gauge whether Bitcoin is nearing an unsustainable level.
The first signal to watch for is the “MVRV ratio,” which compares Bitcoin’s market value to its realized value. Currently at 2.67, this ratio typically peaks over 3.7 when Bitcoin reaches its highest valuation. In February 2021, the MVRV ratio hit a record of 7 as Bitcoin surged to $60,000.
Another indicator, the Crypto Fear & Greed Index, measures market sentiment and has been above 80 since Nov. 12, reaching as high as 90. This index, combined with other factors, suggests Bitcoin could be approaching a local peak.
Monitoring the flow of new money into the market is crucial. CryptoQuant suggests keeping an eye on Bitcoin’s realized cap growth chart to track new money inflows. Currently, there is still significant new money entering the market, indicating a bullish phase.
Additionally, the Coin Days Destroyed tool tracks the movement of dormant Bitcoin. A spike above 15-20 million can signal a bearish trend for Bitcoin’s price. The indicator is currently at 15.1 million.
The Inter-Exchange Flow Pulse (IFP) monitors Bitcoin’s movement to and from derivatives exchanges. IFP is currently around 730,000, trending upwards. In previous bull runs, IFP has reached 1 million while dropping to 200,000 in bear markets.
Despite reaching highs over $94,100, some analysts like VanEck’s Matthew Sigel predict further price increases, targeting $180,000 next year. With these warning signs in mind, investors can make informed decisions in the volatile crypto market.
