These parameters indicate the risk of a further decline in the face of Bitcoin: CryptoQuant

Bitcoin's recent price correction has the asset hovering over key support levels, which means more doom for the market. Analysts at CryptoQuant say the cryptocurrency has hit a key level that acts as resistance in this bull cycle, and on-chain metrics are not showing signs of recovery anytime soon.

According to the weekly report, BTC has fallen below the trader's lower price band for the first time in this bull run. This level has served as a support during this cycle, and if the support fails, the cryptocurrency may drop to the $40,000 level, which is the lower band of the traders' guaranteed price.

However, analysts think that the probability of the support falling is low because it means that the market has entered a bear cycle.

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Futures market indicators and reduced demand for Bitcoin from traders indicate that BTC could extend this correction and cause more bloodshed. Trading activity in the futures markets is dominated by selling and shorting transactions, and investors are willing to open short positions rather than long positions, which means the currency rate is turning negative.

Bitcoin traders have been reducing their holdings since the end of May, and the demand for BTC from these market participants continues to decline.

“Traders increased their holdings from October 2023 to early May 2024, when Bitcoin rose to $70,000. To recover, we need to see a recovery in traders' Bitcoin price demand, CryptoQuant said.

No positive momentum from traders.

The fall in bitcoin prices has pushed traders' profit margins to their worst levels since November 2022, when bankrupt crypto exchange FTX collapsed. So there is no positive motivation from them. The profit margin on the chain is set at 18%; Positive price momentum occurs when the profit margin rises above zero and stays above the 30-day moving average.

In terms of valuation, Bitcoin's Market Value to Virtual Value (MVRV) ratio has fallen below its 365-day moving average. This action has historically been aligned with the extension of depreciation or the onset of a bear market.

“Investors should monitor these types of benchmarks to assess price upside (if MVRV breaks above its 365-day moving average) or further correction,” the analysts added.