NOIDA (CoinChapter.com)—On July 25, Bitcoin’s price continued its four-day downtrend, with the token dropping over 3% to reach a daily low below $63,500. Overall bearish sentiment, along with unlucky technicals, could be the reason for BTC’s slump.
The downtrend caused the BTC USD pair to nearly pare all its gains since July 20, before the bulls entered the market and painted a semblance of a recovery.
On-Chain Metrics Could Confirm A Bearish Setup
The Market Value to Realized Value (MVRV) ratio, an on-chain metric for assessing potential market tops and bottoms, has shown a notable decline. The metric fell from above 2.8 in early March to around 2.4 by late July.
The reduction indicates that the market’s realized profits have decreased, suggesting that traders are less optimistic about future price increases. A lower MVRV ratio typically signals that Bitcoin is overvalued relative to its realized value, prompting holders to sell off their positions to secure profits.
Simultaneously, the net transfer volume of Bitcoin to exchanges has experienced significant spikes. A substantial inflow to exchanges on July 24 highlights increased selling pressure as traders move their assets to platforms where they can easily liquidate.
The trend aligns with a bearish outlook, as heightened exchange inflows often precede significant sell-offs. Such spikes in exchange inflows often correlate with increased selling pressure. Hence, the BTC movement to exchanges implies that holders are preparing to sell, contributing to the downward price pressure.
A Bearish Setup In Place For Bitcoin Price
The on-chain metrics could exacerbate an already bearish situation brewing on the BTC USD price chart, called the ‘descending channel.’
The upper trendline resistance recently rejected BTC’s attempt to break out of the channel. As a result, Bitcoin’s price would likely drop to the channel’s support trendline near $54,000, marking a 17% drop in prices.
Furthermore, a breakout below the descending channel could intensify the bearish pressure and force Bitcoin price to test the $50,000 price level. However, the downtrend toward the channel’s support line remains a clear and present danger for the bulls.
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