Bitcoin's On-Chain Metrics Slow, But There Are Still Signs Its Price Rally Will Continue

Bitcoin has recently seen an impressive price rally after weeks stuck in a consolidation phase between $9,000 and $10,000 levels and several factors suggest the bull run isn't over yet.

Last week Bitcoin's price started at $11,100 and closed at $11,650, the highest weekly close since after it hit $20,000 in 2017. The multi-year weekly high close is significant for traders looking for evidence that Bitcoin's bull run will continue. At the time of writing the currency is trading even higher at $11,812 and is up 1.32%.

While the currency's price action has been strong, a recent Glassnode report revealed that several on-chain metrics weakened over the course of last week signaling that investors may want to proceed with caution.

Glassnode tracks Bitcoin metrics by assigning scores to network health, liquidity and sentiment and then compiling those scores into one final metric called the Glassnode Network Index (GNI). All categories were down last week which was reflected by a four point drop in Bitcoin's GNI.

PC: Bitcoin GNI via Glassnode

On chain transactions were down, however report authors noted that they are still high compared to Bitcoin's performance pre-rally. Saving habits also declined, but that could be attributed to hodlers acquiring BTC at a slower rate due to the price increase.

While these metrics suggest Bitcoin's rally may soon slow or even stall, one key metric carries hope for a sustained price rise. MVRV is a metric comparing an asset's market cap to its realized cap, which can help to pinpoint an asset's worth and predict market tops and bottoms. Glassnode report authors argue that historically when MVRV has come from below 1 and hit 1.25 a bull trend has followed. MVRV is currently standing at 1.26 and if this ratio stays above 1 history suggests that Bitcoin's price will continue to trend upwards.

PC: MVRV via Glassnode

Instability in traditional marketplaces may also help to buoy Bitcoin's price. United States President Donald Trump continues to escalate tensions with foreign powers — including China as he threatens to ban popular Chinese-owned social networking app TikTok and Canada after reinstating an aluminum tariff — causing some to believe the U.S. dollar may begin to lose value, especially as the coronavirus pandemic continues to take its toll. If investors lose confidence in the dollar's strength they may flock to finite assets like gold or Bitcoin.

By Emily Mason

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