Bitcoins [BTC] the recent bear phase was severe. The crypto has capitulated from a high of around $126,000 to around $68,000 at the time of writing. And yet this wave of selling pressure could be critical rather than merely destructive.
In fact, market sentiment seemed to suggest that Bitcoin’s decline could be approaching a reset point – a point where the price begins to recover from recent losses based on prevailing conditions on the chain.
Bitcoin is approaching undervaluation
At the time of writing, data from CryptoQuant showed that Bitcoin’s market value to realized value (MVRV) ratio was approaching undervalued territory.
The MVRV ratio measures whether an asset is overvalued or undervalued by comparing its market capitalization to its realized capitalization, which reflects the value of coins at the price they last moved. When the ratio approaches 1 or falls, this indicates undervaluation.
Bitcoin’s MVRV had a value of 1.1, close to this critical threshold. The last four times Bitcoin entered this zone, it recovered and transitioned into a broader rally.
Source: CryptoQuant
However, entering the undervalued zone does not immediately lead to a rally. The price may continue to decline while the MVRV remains near or within this range. Historically, such a phase often marks a period of accumulation, during which investors gradually build positions in anticipation of a sustained upward move.
A confirmed recovery from this zone could set the stage for new highs. If bullish sentiment strengthens and macro or geopolitical conditions stabilize, Bitcoin could regain momentum towards the $100,000 level.
What could force Bitcoin into a deeper undervaluation?
Sustained selling remains critical to pushing Bitcoin further into undervaluation. An increase in supply coming to the market, combined with weaker demand, would put additional downward pressure on prices.
Institutional investors have led the predominant selloff. In fact, US Spot Bitcoin exchange-traded funds (ETFs) also continue to record consistent outflows.
According to Sosowaarde factsThis marks the third time since inception that US Spot Bitcoin ETFs have recorded four consecutive weeks of net outflows. On a monthly basis, this was the fourth bearish month for ETF flows.
Source: SosoValue
Over the last two trading sessions, cumulative outflows reached $686.67 million, approaching the $1 billion mark. These flows implied that investors have realized gains or reduced losses on their Bitcoin holdings. If demand remains subdued, continued selling could push the crypto to cheaper levels.
Spot market activity also appeared to reinforce this weakness. According to CoinGlass, that demand fell from $1.02 billion to $89.73 million on February 12, with net sales dominating that period.
Long-term holders remain critical
Long-term holders could play a decisive role in shaping Bitcoin’s next move. Their willingness to accumulate could determine whether the market stabilizes and moves into recovery.
The Binary Coin Days Destroyed (CDD), which tracks whether long-term holders move their coins, had a value of 0 at the time of writing. This indicated relative calm among this cohort, indicating limited large-scale distribution.
Source: CryptoQuant
Finally, the ratio of long-term holders (LTH) to short-term holders (STH) also fell, implying that short-term holders have sold more aggressively than long-term investors.
If long-term holders maintain their conviction while short-term selling exhausts itself, Bitcoin’s approach to undervaluation could ultimately serve as the basis for a broader market recovery.
Final summary
- Bitcoin’s MVRV highlighted that the asset is approaching undervalued territory – a level that has preceded rallies four times before.
- Spot Bitcoin ETF outflows could accelerate Bitcoin’s move toward undervaluation.