Bitcoin’s Value Drops Further; Indicators Suggest Caution

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How Much Will Bitcoin Lose Before The Next Bull Market Begins?

Although the Fear and Greed Index of Bitcoin is neutral, some might argue that BTC is overvalued. Bitcoin has dropped more than 2.5% in the last seven days. The metrics suggest that the selling pressure on BTC is high.

Bitcoin Price Development

Bitcoin has not been able to record any gains in recent weeks as its value continued to fall. The price of the cryptocurrency, which was still at $48,000 on January 11, fell to below $42,000 at the time of reporting. This price drop caused a significant change in one of BTC’s key metrics.

Further Price Drop In Sight?

The last week was not the best for Bitcoin, as its value fell by more than 2.5% in seven days. According to CoinMarketCap, BTC was at $41,595.04 at the time of reporting, with a market capitalization of over $815 billion. BTC’s trading volume also declined, indicating a lower interest from investors in trading the coin.

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Fear and Greed Index

Bitcoin’s Fear and Greed Index became neutral as it had a value of 52. The Fear and Greed Index is a tool for measuring the overall sentiment in the cryptocurrency market, using social signals and market patterns. If the index reaches the greed zone, this indicates a price correction. On the other hand, a movement of the metric into the fear zone indicates that the possibility of a price increase is high. Therefore, the above index indicates that the price of BTC may continue to fall before it starts a bull rally.

Network Value to Transactions Ratio

Another key indicator pointed to a similar result. Specifically, AMBCrypto’s review of Glassnode data indicated that Bitcoin’s Network Value to Transactions ratio (NVT) saw a strong increase. For the uninitiated, a high NVT ratio generally indicates that an asset is overvalued.

Caution for Bitcoin Investors

Some other metrics also pointed to a possible price drop. AMBCrypto’s analysis of CryptoQuant data revealed that BTC’s Exchange Reserve increased at the time of reporting. Its net deposit on exchanges was also high compared to the seven-day average. This means that the selling pressure on the coin was high at the time of reporting.

Summary

In summary, the current indicators suggest that Bitcoin is facing a further downward movement before a new bull market begins. Investors should therefore be cautious and closely monitor market developments.

Source: AMBCrypto, CoinMarketCap, Glassnode, CryptoQuant

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