Fluctuation and Challenges in the Financial Market: The Role and Prospects of Bitcoin

In financial markets, it is equally important to maintain a sense of awe and passion. Every financial domain is filled with unknowns, risks, and challenges, and long-term participation in the cryptocurrency market deeply recognizes the value of independent thinking. Currently, the focus should not be limited to whether Bitcoin is a scam or the belief of certain individuals, but rather on the market's activity and trading opportunities, and thinking about how to profit in this environment.

Turbulence in Financial Markets and Asset Correlation

Traditionally regarded as a safe-haven asset, gold has recently seen a price drop of over 10%. This indicates that there are almost no absolute safe havens in times of widespread market panic. Bitcoin was once considered a potential safe-haven option due to its low correlation with traditional assets, but during a global financial crisis, it too struggles to stand alone.

Recent market performance shows that when the stock market experiences a rare large-scale crash, Bitcoin, as the leader of the cryptocurrency market, also did not escape the difficulty and faced a large amount of sell-off. Interestingly, as the stock market shows slight signs of warming, the price of Bitcoin has also rebounded to its previous support level. The S&P 500 index and the price of Bitcoin exhibit an astonishing consistency, and Bitcoin shows significant reactions to major events such as the Federal Reserve's interest rate cuts and travel restrictions.

MVRV Indicator Analysis

The market value to realized value (MVRV) ratio of Bitcoin has recently fallen below 1.0 for the fourth time. MVRV is an important indicator that measures the ratio of the market value of a cryptocurrency to its realized market value. The realized market value can be regarded as an approximate value of the total investment cost of market participants in that asset, reflecting the general market consensus on value during a specific period, which can be referred to as "fair price".

The calculation formula for MVRV is: market value (current price multiplied by circulating supply) divided by realized value (the sum of the value of each circulating Bitcoin at its last transfer). This metric helps to exclude the impact of long-term lost or unclaimed coins on market capitalization, while also reflecting the confidence of long-term holders.

Typically, when the MVRV is below 3-3.5, it indicates that the market price is below "fair value," which may signal a significant appreciation potential. On the other hand, when the MVRV is above 3.5, it may imply an increased risk of price decline. However, it is important to note that a high MVRV does not necessarily indicate a price increase; rather, it may lead to a decline due to increased profit-taking pressure.

Currently, Bitcoin's MVRV has fallen into a rarely low range, which may indicate that now is a relatively ideal time to buy.

Future Outlook

To truly break free from the constraints of the traditional financial system and reshape its value narrative, Bitcoin may need to undergo greater market fluctuations. However, most investors may find it difficult to withstand drastic price fluctuations.

Although the current market situation is not optimistic, opportunities always favor those who are prepared. By correctly interpreting market changes, it is still possible to gain profits in this challenging environment.

The market is constantly changing, and investment decisions need to be made cautiously. This article is for reference only and does not constitute investment advice. Before making any investment decisions, please ensure that you conduct thorough research and risk assessment.