Bitcoin Shows Resilience After Volatile Week
Bitcoin has managed to climb back above $112,000 in early Monday trading, reaching $112,293 at its peak before settling around $111,835. This recovery comes after a particularly turbulent week that saw significant price swings and major liquidations across the cryptocurrency market.
What’s interesting is that despite the recent volatility shaking up traders, some analysts are seeing this as a normal part of the market cycle rather than the end of the bull run. The past week was rough for crypto investors – we saw two major liquidation events that wiped out over $4 billion in long positions. The first hit on Monday last week took out nearly $3 billion, followed by another $1 billion liquidation on Thursday when Bitcoin dropped to around $109,000.
On-Chain Data Suggests Bull Market Intact
Crypto investment firm XWIN Research Japan published some compelling analysis over the weekend that caught my attention. They’re looking at on-chain metrics and arguing that the underlying fundamentals still support a continuing bull market. Their research points to two key indicators that give them confidence.
First, they’re watching the Market Value to Realized Value (MVRV) ratio, which compares Bitcoin’s current market value to the average cost basis of holders. This ratio has dropped to around 2, meaning the average holder’s cost basis is about half of the current price. Historically, this level reflects neither panic selling nor euphoric buying – it’s kind of a middle ground where investors are sitting on healthy gains but the market has cooled from overheated conditions.
Second, they’re noticing that profit-taking by long-term investors has decreased. This is significant because when long-term holders aren’t selling, it effectively reduces the available supply in the market. That reduction in selling pressure can help offset short-term volatility and create conditions where renewed demand can push prices higher.
Market Sentiment Shows Recovery
The broader market sentiment appears to be stabilizing as well. The Crypto Fear & Greed Index, which tracks market sentiment, has climbed back to “Neutral” territory with a score of 50 out of 100. That’s a 13-point jump from Sunday and represents the first time we’ve seen neutral sentiment since September 19th. The index had fallen as low as 28 last Friday, which was the lowest reading since mid-April when Bitcoin was trading around $80,000.
Looking at the liquidations more closely, Bitcoin positions accounted for the majority of the losses during the September 22nd liquidation event, with $726 million in long positions wiped out. Interestingly, during Thursday’s liquidation, Ethereum long positions took the biggest hit with $413 million erased.
XWIN’s analysis suggests that what we’re seeing might be more of a “digestion period” rather than the end of the rally. They point out that past cycles have shown Bitcoin entering its strongest expansion phases after consolidating in this MVRV range. The firm concludes that this cycle hasn’t reached its terminal stage yet, and the recent consolidation could actually be setting the stage for the next major upward move.
Of course, nobody can predict the future with certainty, but the combination of recovering prices, improving sentiment, and supportive on-chain data does provide some reassurance to investors who might have been worried about last week’s volatility. The market seems to be finding its footing again, though I think we should probably expect more bumps along the way given how volatile crypto markets tend to be.
