Warning signs are showing that this key indicator is pointing to upcoming corrections for BTC, Altcoins (Analysis).

Bitcoin climbed above $52,000 last week, a level not seen since December 2021, boosting the collective crypto market to around $2 trillion. Several altcoins have responded positively to this development, closely following the lead crypto asset's footsteps.

A notable measure, given historical data, is the higher-than-average risk associated with buying or starting short-term positions that last four months or more. In such a situation, investors may be tempted to liquidate their assets.

Altcoins face sell-off risks

Since mid-October 2023, most of the properties have made significant gains due to market growth. According to Santiment's latest analysis, except for a few slow-performing altcoins, most crypto assets have generated gains for investors over the medium to long term.

As a result, the model suggests “overbought” signals. Meaning – the MVRV indicator is flashing, indicating a higher-than-average exposure to buying or opening new positions when markets rise in four months.

The MVRV ratio basically compares the asset's market capitalization to its acquired capitalization and helps investors estimate whether the price of an altcoin is in line with its “fair value”. When the market price exceeds the realized value, it indicates that the unrealized profit is increasing. Such a case typically indicates selling when market players are looking to take advantage

But the on-chain crypto analytics platform said the ‘overbought' signs do not necessarily indicate a major correction in the crypto market.

Additionally, several projects have been ramping up significantly in recent weeks. Ethereum-based altcoins are closely following this bullish trend as the price of Ethereum rises above. For example, Polygon (MATIC) gained more than 12 percent last week.

Other altcoins such as XRP, Cardano, Dogecoin and Polkadot witnessed gains of 6.37%, 11.66%, 4.81% and 4.96% respectively last week.

Improving Bitcoin

Despite overbought signs, some altcoins may have the potential to outperform Bitcoin.

Popular AI chatbot Perplexity has predicted that altcoins such as Solana, Avalanche, Cardano, Chainlink and Polkadot will not only seriously challenge Ethereum's market share, but will surpass Bitcoin by 2024.