Bitcoin is currently under significant selling pressure at spot rates, plummeting below critical multi-month support in the $53,500 to $56,000 range. As bearish sentiments dominate the market, concerns are mounting that the cryptocurrency could further decline, potentially plunging to the $50,000 mark or even dipping to $40,000, signaling a continuation of the bear trend.
Despite this grim outlook, several on-chain indicators suggest some underlying strength. An analyst has noted that Bitcoin prices have fallen below the “moderate risk lower boundary” of 9% from the average purchase price of active investors for the fifth time in eighteen months. The average purchase price for these active investors, or addresses that acquired Bitcoin within the last 155 days, is currently pegged at $48,000. Earlier today, Bitcoin prices crashed to as low as $49,000 before bouncing back slightly. This drop, though alarming, has not yet incited full panic mode among these active investors. It is anticipated that challenges will arise if the $48,000 level is breached, which would test the resolve of these investors.
Examining the trading charts, it’s evident that Bitcoin is trending downwards, with significant trading volumes highlighting that bulls still face considerable challenges. Should Bitcoin fall again, breaching the $50,000 and $48,000 levels, it could trigger weak hands to exit, thus exacerbating the sell-off.
From a technical perspective, Bitcoin is now within a bearish breakout formation after closing below the recent consolidation levels. With July’s gains sharply reversed, it appears highly likely that losses will continue to spill over into the coming weeks. This outlook suggests that Bitcoin may slip to $40,000 in line with the ongoing bear trend.
Additionally, one analyst has observed that the Bitcoin market value to realized value (MVRV) ratio is currently at levels last seen during the collapse of FTX in November 2022. The MVRV ratio measures whether Bitcoin is being traded at a discount. Although Bitcoin briefly plunged to $15,800 during that period, the subsequent recovery paved the way for the bull run of 2023, extending into early 2024. Therefore, if the events of August 5 resemble the panic selling of late Q4 2022, it is possible that Bitcoin could once again be available at a discounted rate.
