The last seven days have been tough on the crypto market due to several macroeconomic factors that caused a plunge in several assets. Bitcoin has lost over 11% in its price after being negatively impacted by the CPI data. However, the bloodbath is not ending soon as the on-chain ratio of the short-to-long-term realized value (SLRV) now indicates a silent phase before a bearish storm.
bitcoin storage area
Bitcoin’s price action largely depends on the movements of its long-term holders, as they are solely responsible for creating volatility in the price charts. To examine bitcoin’s supply moves, the SLRV ratio tool is used to measure the movement ratio between short-term and long-term holders to determine the future price development of bitcoin.
Invented by Capriole Investments, a cryptocurrency investment fund, this tool identifies the nature of the crypto market by utilizing the risk-on and risk-off allocations to Bitcoin. The SLRV ratio measures the percentage of Bitcoin moved in the last 24 hours with respect to the percentage moved during the previous six to twelve months by long-term holders.
Bitcoin’s SLRV ratio is currently in the pink zone, according to on-chain data provider Glassnode, and the crypto king entered this zone in June when its price touched a low of $17,600. The SLRV ratio is below 0.04, which indicates a historical accumulation phase before starting a bearish trend.
Preparing For A Downtrend
Digging further, it can be witnessed that Bitcoin previously went into the pink zone before joining a bull run, a pattern seen in 2018, 2015, and 2012. Therefore, it can be concluded that Bitcoin is going to follow the same historical pattern before driving its price upward by the beginning of 2023. The SLRV data suggests that Bitcoin will dive deep into the pink zone, resulting in more decline in its current price of $19,140 before making a bullish reversal.
To eliminate some of the issues related to the SLRV ratio, Capriole Investments introduced SLRV ribbons that use short-term and long-term MAs (moving averages) in the SLRV ratio to determine the transition of bitcoin’s price movement.
The SLRV ribbons show that Bitcoin is now in a predominantly risk-off state after China’s ban on bitcoin mining. The SLRV MA-150 has been downtrend since bitcoin entered the pink zone, indicating a bearish rally and no signs of any reversal by the end of 2022.
Bitcoin’s net unrealized profit/loss (NUPL) ratio is also trading downwards due to lower profits during the crypto winter.
As a result, bitcoin has entered the capitulation zone twice this year, and it appears to be the last of the bearish phase before starting a bull run.
Benjamin Cowen, founder of the blockchain firm Cryptoverse, said, “Comparing various bear markets, you know we spend a couple of months sitting down about 70% from all-time highs, and then it’s like the end of the year. Or early next year, we get that final dedication.”
Unfortunately, this year has turned out to be disappointing for crypto investors in terms of profit capability. Besides being in the capitulation zone for the second time this year, Bitcoin has made it to the sixth time in its twelve-year price history.
