Analysts at crypto exchange Bitfinex say several on-chain metrics are flashing the buy signal for bitcoin (BTC), indicating a potentially attractive entry point for market participants.
According to the latest Bitfinex Alpha report, the Market Value to Realized Value (MVRV) measure and the open interest (OI) weighted funding rate, which shows the cost of holding bitcoin futures positions, signal an advantageous buying opportunity for BTC investors.
An Attractive Entry Point for BTC Investors
The MVRV indicator, which plays a crucial role in determining if BTC is overvalued or undervalued compared to its fair value, has been declining since the start of April. A score above 3.5 indicates that the Bitcoin market is close to its peak, while a score below one signals a bottom. As of April 26, the MVRV ratio had plunged 10.5% from its monthly top to 2.21, suggesting that BTC may be currently undervalued.
Also, an MVRV ratio below its 90-day average, currently at 2.44, is often followed by significant returns. This substantiates Bitfinex's claims that the current trading juncture may be a lucrative opportunity for Bitcoin investments.
On the other hand, the OI-weighted funding rate witnessed a positive shift on April 24, following a decline into the negative zone the week before. The metric fell as low as -0.0071% on April 14. Bitfinex said the shift from a negative to positive funding rate indicates rising interest in long Bitcoin positions and a change in market sentiment from bearish to bullish.
This also means that traders are increasingly willing to pay more to hold positions that bet on the value of BTC going up.
Bitcoin Dominance Declines
It is worth noting that a low MVRV ratio and a high OI-weighted funding rate do not guarantee that Bitcoin's current local low of $59,675 will hold before the cryptocurrency reaches a new all-time high. However, these metrics have historically coincided with a BTC bottom, suggesting that the asset may not drop below that level.
Besides on-chain bullish signals, Bitcoin's dominance has declined as attention shifts toward altcoins, which are outperforming the leading digital asset. Analysts said the shift occurs because Bitcoin's reduced supply growth is considered a long-term bullish development, increasing investor risk appetite and leading them to seek higher returns from alternative assets.
