When assessing whether or not Bitcoin’s price is nearing an unsustainable level, there are several key indicators to watch out for. According to onchain data service CryptoQuant, one of these warning signs is already flashing red.
MVRV Ratio: A Signal of Unsustainable Valuation
The first signal to monitor is the MVRV ratio, which measures Bitcoin’s market value against its realized value. If this ratio exceeds 3.7, it typically indicates that Bitcoin has reached its peak valuation for the moment.
What is the current score?
According to CoinGlass data, the current MVRV ratio stands at 2.67, indicating that Bitcoin’s price is not yet at an unsustainable level.
Historical Context: When Did We Reach a Peak?
Bitcoin’s MVRV ratio reached its highest point in February 2021, when it rallied to reach a historical peak of around $60,000. This indicates that we are still far from reaching the peak valuation threshold.
Historical MVRV Score
Source: CoinGlass
Crypto Fear & Greed Index Overheats
The next indicator to watch is the Crypto Fear & Greed Index, which measures market sentiment. When the index hits 80 out of a total score of 100 – combined with other indicators – Bitcoin could be near a local top.
Current Sentiment
The Crypto Fear & Greed Index has been above 80 since November 12 and reached as high as 90 on both November 17 and November 19. This is the highest point it has reached since February 2021, indicating that market sentiment is extremely positive.
Source: Alternative.me
New Money Inflows: A Sign of Strength
The third signal looks at how much new money is coming into the market without significant ‘new money flow.’ The price of cryptocurrencies tends to stall and eventually pull back when this happens.
Current Inflows
Bitcoin’s realized cap growth chart shows that new money inflows are still relatively high, indicating that Bitcoin is in a ‘bull phase.’
Coin Days Destroyed Indicator: A Short-Term Bearish Signal
Another indicator assesses if long-term BTC holders are actively selling. The Coin Days Destroyed tool shows the movement of Bitcoin that has been dormant for long periods and checks if the coins are being sold.
Current Score
The indicator currently stands at 15.1 million, which is relatively high. However, CryptoQuant says this could be a short-term bearish signal for the price of Bitcoin if it spikes above 15-20 million.
Source: CryptoQuant
Inter-Exchange Flow Pulse (IFP): A Bullish Structure
The final indicator is the Inter-Exchange Flow Pulse (IFP), which monitors the movement of Bitcoin to and from derivatives exchanges. CryptoQuant says the IFP still shows a bullish structure, with traders moving Bitcoin to derivatives exchanges to be used as collateral.
Current Trend
Bitcoin’s IFP is currently running around 730,000 and is moving in an uptrend. In previous bull runs, the IFP has reached as high as 1 million and sank as low as 200,000 during the depths of the bear market in late 2023.
Source: CryptoQuant
Conclusion
While some analysts think Bitcoin still has plenty of room left to run, including VanEck’s head of digital assets research, Matthew Sigel, who is targeting a price of $180,000 BTC sometime next year, it is essential to monitor these key indicators and be aware of the warning signs.
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