Bitcoin price started trading below the $57,000 level on Friday, August 16, after a sudden 7% drop on Thursday. While the leading cryptocurrency is showing good signs of recovery, a leading crypto analyst has explained how the latest price drop may have pushed the BTC price into a bearish phase.

Bitcoin MVRV Drops Below 1-Year SMA – Impact on Price?

In a post on the X platform, popular crypto analyst Ali Martinez shared that Bitcoin price has undergone a shift in its cycle following the latest price drop. This on-chain revelation is based on the Glassnode MVRV (Market Value to Realized Value) Momentum indicator, which serves as a tool for identifying macro market trends.

The MVRV Momentum indicator mainly consists of the MVRV ratio and the 1-year simple moving average (SMA). When the MVRV ratio breaks above this SMA, it signals a transition to the bull market. Meanwhile, a breakout below the 1-year simple moving average signals a shift to the bear market.

Normally, strong breakouts above the MVRV 1-year SMA indicate that large volumes of Bitcoin have been bought below the current price, indicating that holders are now in profit. On the other hand, when there is a strong breakout below the moving average, it indicates that large volumes of BTC have been bought above the current price, with holders in the red.

A chart showing the Bitcoin price and the MVRV momentum indicator | Source: Ali_charts/X

According to Martinez, the BTC cycle entered a bearish phase after the Bitcoin price dropped below $61,500. This latest significant break of the MVRV ratio below the SMA shows that a significant amount of BTC has been acquired above $61,500. However, the coins are now in losses, which could potentially lead to heavy distribution by investors looking to cut their losses.

When a large number of investors are in the red, there is increased pressure to sell, which can put further downward pressure on the Bitcoin price. Ultimately, this can lead to a situation where falling prices result in more asset offloading, thus amplifying the momentum of the bearish phase.

Bitcoin Price at a Glance

At the time of writing, Bitcoin’s price continues to hover around $59,000, reflecting a 2.5% increase over the past 24 hours. Nevertheless, the leading cryptocurrency is down by almost 3% on the weekly timeframe, according to data from CoinGecko.

The price of Bitcoin hovers around the $59,000 level on the daily timeframe | Source: BTCUSDT chart on TradingView

Main image from iStock, chart from TradingView