Data Suggests Altcoins May Be Overbought
A recent analysis by on-chain analytics firm Santiment indicates that many altcoins have entered what they refer to as the “danger zone,” a potential bearish sign. The analysis focuses on the Market Value to Realized Value (MVRV) ratio, which compares a cryptocurrency’s market cap with its realized cap.
Realized cap is determined by the last transaction price of a token, serving as its current cost basis. The MVRV ratio can provide insight into the profitability ratio for average investors in a cryptocurrency. Historically, high MVRV ratios have indicated an overheated market, while low ratios suggest an underbought status.
Altcoins Inside the Danger Zone
Santiment’s analysis reveals that most altcoins are currently in the danger zone, with the MVRV ratio diverging towards -1. This indicates that traders are holding high profits. The chart provided by Santiment illustrates the divergence of the MVRV ratio for different altcoins.
The danger zone represents an opportunity for profit-taking and caution when considering new positions. However, it does not necessarily mean a massive correction is imminent. Santiment advises that while markets experience a prolonged surge, there is higher risk than average in buying or opening new positions.
Ethereum Decoupling from Bitcoin
In recent times, Ethereum has shown a decoupling from Bitcoin. While Bitcoin has been trading sideways, Ethereum has surged above $2,900. This trend highlights the growing strength and independent movement of Ethereum within the crypto market.
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