Bitcoin: Three Reasons Why You Shouldn’t Be Bearish in 2022

Bitcoin price may have fallen on March 6 and the short-term outlook may look bearish, but the long-term outlook remains as bullish as ever. There are three important on-chain metrics that outline an ultra bullish scenario for BTC in the upcoming bull run.

Extreme optimism for Bitcoin price

Perhaps the most widely used and equally important on-chain metric for Bitcoin price is the 365-day Market Value to Realized Value (MVRV) model. This index is a snapshot of investor sentiment at a given time. It can be used to gauge the average profit/loss of market participants who have purchased BTC over the past year.

The main benefit of using this metric is that it provides a signal as to when a sell-off is likely to occur. And, when an investor should be optimistic. According to Santiment’s research, a value below -10% indicates that short-term holders are selling at a loss and this is usually where long-term holders tend to accumulate.

Therefore, a value below -10% is often referred to as an “opportunity zone”, because the risk of selling is lower. However, the reverse is also true, revealing that a high MVRV value indicates that many holders are making profits and are likely to sell to realize their gains.

Right now, the 365-day MVRV is hovering around the zero line, indicating that investors are unprofitable. However, over the past four years, the local peak for BTC has occurred when the MVRV hit 24%.

Thus, a conclusion indicates that there is still more room for BTC to move higher before a selling threat emerges.

Source: Santiment

The next important indicator that long-term investors should pay attention to is the distribution of the supply of whales holding BTC.

Investors holding between 1,000 and 10,000 BTC have been accumulating since June 2021 and the same goes for wallets holding between 10,000 and 100,000 BTC. The number of former market participants increased from 2,034 to 2,166, representing an increase of 6.5%.

The next category of holders with 10,000 to 100,000 BTC increased from 78 to 85. A spike in these holders only indicates that institutions are very optimistic and expect an explosive performance from Bitcoin price.

Source: Santiment

The change in net foreign exchange position indicator also paints a picture of the behavior of large investors. Since March 2022, a total of 100,000 BTC have left centralized entities, effectively reducing sell-side pressure.

Source: Glassnode

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