Uncertainty in Financial Markets and Bitcoin Investment Strategies

For the financial markets, we need to maintain a sense of awe while also having passion. Any financial market is full of unknowns, risks, and challenges. After spending a long time in the cryptocurrency space, I gradually realized the importance of independent thinking. Now, I no longer get caught up in whether Bitcoin is a scam or a belief of certain individuals, but instead focus on whether the market still has volatility and trading opportunities, and how to profit from it.

Turbulent Financial Markets and Asset Correlation

After years of development, the financial market has always regarded gold as a high-quality safe-haven asset. However, recently, the price of gold has also seen a decline of over 10%. When market panic spreads, it seems that there is no truly safe harbor.

Bitcoin is often viewed as a potential safe-haven choice due to its price movements often being independent of other assets, especially during downturns in traditional financial markets. However, in global financial crises, Bitcoin also struggles to provide a secure refuge for investors.

When the stock market experienced a rare large-scale crash, Bitcoin, as the leader of the cryptocurrency market, also faced massive sell-offs. Accordingly, after a slight recovery in the stock market, the price of Bitcoin rebounded to the previous support level.

The S&P 500 index shows a high degree of consistency with Bitcoin's movements. Over the past week, Bitcoin's price has reacted to several major events, such as the Federal Reserve's interest rate cuts and travel restrictions policies.

MVRV Indicator Analysis

The market capitalization to realized value ratio of Bitcoin ( MVRV ) has historically fallen below 1.0 for the fourth time. The MVRV indicator is the ratio of the cryptocurrency's market capitalization to its realized market capitalization. The realized market capitalization can be viewed as an approximate value of the total cost invested by market participants, reflecting the general value consensus of market participants during a specific period, which can be referred to as the "fair price".

MVRV can show the ratio of market price to "fair price":

• An increase in value suggests that the Bitcoin price may be overestimated, with a higher probability of decline.
• A decrease in value indicates that the price may be undervalued, increasing the probability of a rise.

MVRV calculation method: MVRV = Market Value / Realized Value Market value = Price * Number of Bitcoins mined Actual value = The total value of each Bitcoin in circulation at the time of the last transfer.

Compared to market value, actual value:

1. Excluded the impact of long-term lost or unclaimed coins on market value.
2. Reflect the true price level through the accumulation of cost price, eliminating the impact of group emotions, while also demonstrating the confidence of long-term holders.

MVRV as a commonly used indicator can better reflect the trend of Bitcoin bull and bear market transitions:

• When MVRV is below 3-3.5, the market price is lower than "fair value", Bitcoin has a large appreciation space, suitable for building positions.
• When MVRV is above 3.5, the probability of Bitcoin falling increases. It is advisable to assess risks and consider taking profits.

It should be noted that a high MVRV does not necessarily indicate a future price increase. On the contrary, when holders are making substantial profits, the likelihood of large-scale sell-offs may also increase.

Current MVRV data shows that Bitcoin's market value has fallen below the cost limit, entering the green zone. Throughout Bitcoin's history, the green zone appears infrequently, and buying Bitcoin at this stage may be a wise choice.

Conclusion

Bitcoin may need to go through a bigger crisis to break free from the shackles of the dollar system and reshape its narrative. However, most people find it hard to endure extreme price fluctuations.

Although the current market situation is not very optimistic, "opportunity always favors the prepared." As long as we can correctly interpret market changes, it is still possible to achieve considerable returns in this market and fulfill our life goals.

This article is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, and investments should be approached with rationality.