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Bitcoin Is Trading at a Loss and Ethereum Is Oversold, According to Kraken – Here’s What Could Happen Next

Bitcoin (BTC) and Ethereum (ETH) are currently trading at a discount, but crypto exchange Kraken says that the bull run might not be over for the two biggest digital assets by market cap.

In its January 2022 crypto on-chain digest, Kraken says that Bitcoin’s spent output profit ratio (SOPR) and Ethereum’s market value to realized value (MVRV) Z-score indicate that ETH and BTC are trading below their fair value, but the exchange says that a rebound is possible.

“Though BTC’s SOPR shows that market participants are mainly trading BTC at a loss, the situation was much worse during Bitcoin’s latest bull run retracement from $65,000 to $30,000 from May 2021 to July 2021 before its rebound to new all-time highs.

Moreover, ETH’s MVRV Z-score shows that the crypto asset is now in ‘oversold’ territory, where it historically has struggled to remain for long periods before a bounce in prices.”

The SOPR on-chain metric determines if Bitcoin owners are selling at a profit or loss. If the SOPR is greater than 1, holders of the asset are selling at profit. Otherwise, they are selling at a loss.

BTC’s SOPR shows a bearish sentiment with a reading below 1, but Kraken says that the metric was worse last year when Bitcoin dropped from $65,000 in May to $30,000 in July.

“Should the metric break through a reading of 1 and hold above that level, it could signal the end of the recent bull market correction. However, if Bitcoin remains below a reading of 1 while [the] price continues dropping, it might otherwise confirm BTC has entered into a bear cycle…

While the SOPR is currently signaling bearish, on-chain data painted a much worse picture during the last similar market correction, after which BTC managed to make a strong comeback. In other words, don’t count BTC out just yet.”

The MVRV Z-score also indicates a bullish outlook for Ethereum. The metric is used to assess market profitability based on whether or not the price of the asset is selling above or below its fair value. A reading above 5 suggests that ETH is overbought, or selling above its fair value. Readings below 1 indicate that the cryptocurrency is oversold, or trading below its worth.

“With ETH down -49% from its all-time high of $4,867 on November 9, 2021, the MVRV-Z Score has fallen into ‘oversold’ territory. History shows that ETH’s MVRV Z-score tends to drop to the “oversold” zone during retracements but doesn’t stay in that range long before prices revert.

The last time Ethereum’s MVRV Z-score fell to this zone was around the time of the Black Thursday market crash in March 2020. Though asset values and network activity are retreating, historical on-chain data suggests that it’s not all gloom and doom for ETH. Market participants have historically accumulated during ‘oversold’ MVRV Z-score readings.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock/studiostoks

Bitcoin Is Trading at a Loss and Ethereum Is Oversold, According to Kraken – Here’s What Could Happen Next

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