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Bitfinex Analysis Shows Bitcoin Presents a Promising Buying Opportunity
- MVRV and OI-weighted funding rate indicate a promising entry point for Bitcoin, despite no guarantee that US$59,675 is the bottom.
- If Bitcoin tests support levels repeatedly, it may weaken; breaking above US$71k could signal strength and reverse the trend.
- Rising PCE, PPI, and CPI challenge the Fed to balance recession prevention with inflation control, impacting Bitcoin stability.
On-chain metrics like Market Value to Realised Value (MVRV) and the (Open Interest) OI-weighted funding rate suggest a good entry point for Bitcoin, although they don’t guarantee the current US$59,675 (AU$90,896) will be the lowest before a new high.
According to research done by Bitfinex, BTC is currently retesting its range lows, and if it repeatedly tests this support level, it may weaken further.
Related: Analyst Forecasts More Choppy Bitcoin Trading and Pain Ahead
For bullish momentum to resume, the analysts say BTC needs to approach the US$71k (AU$108k) range highs. A successful breakout towards these highs could indicate strength and attract more buyers, potentially reversing the trend positively.
Conversely, if BTC fails to ascend and breaks below support, it could signal a bearish trend and trigger further declines. Additionally, the OI-weighted funding rate for Bitcoin futures turned positive on April 24th, following several negative dips. This suggests a shift from bearish to bullish market sentiment, with traders showing increased interest in long positions, the analysts added:
A move from a negative to a positive funding rate signals a change in market sentiment from bearish to bullish, meaning traders are increasingly willing to pay a premium to hold positions that bet on the price of Bitcoin going up.
Bitfinex MVRV Indicator Drops, Hints Overvalued BTC
Continuing in their analysis, Bitfinex notes that the Bitcoin MVRV indicator, which helps determine if BTC is over or undervalued, has dropped to 2.21 as of April 26th, suggesting that Bitcoin may be undervalued. An MVRV above 3.5 hints at a market peak, while below 1 signals a bottom.
Additionally, when MVRV falls below its 90-day average, historically, this has led to significant gains, with returns averaging 67%. However, the diminishing impact of Bitcoin halvings on the market, due to the decreasing volume of new coins relative to global trade volume, indicates that halvings are becoming less influential as the market matures, the analysts said.
US Fed Has Difficult Decisions to Make
Meanwhile, upcoming macroeconomic events in the US, including rising PCE, PPI, and CPI inflation data pose a significant challenge for the Federal Reserve, which is caught between needing looser monetary policies to avoid a recession and tighter controls to curb inflation, analysts at Swissblock stated.
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This balancing act is complicated by the potential inflationary benefit of reducing real debt levels, which could harm average citizens facing higher living costs, the analysts wrote in a note shared with CNA. Employment data coming out later on could worsen the situation, meaning further choppy days ahead for BTC, they concluded:
The upcoming April jobs report could exacerbate the situation, creating volatility that BTC will need to navigate.
Swissblock 
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
