The Turmoil of Financial Markets and the Role of Bitcoin

It is crucial to maintain a sense of awe towards the financial markets while also keeping the enthusiasm after entering the market. Any financial market is filled with unknowns, risks, and challenges, and my experience in the cryptocurrency field has made me deeply aware of the importance of independent thinking. The key now is not to judge whether Bitcoin is a scam or a belief of certain individuals, but to focus on whether there are still fluctuations and trading opportunities in the market, and how to profit in this market.

Volatility of Global Financial Markets

For a long time, gold has been regarded as the ideal safe-haven asset, but recently its price has also seen a decline of over 10%. In times of widespread market panic, it seems there is no truly safe haven.

Bitcoin is often seen as a safe haven during downturns in traditional financial markets due to its price movements being frequently uncorrelated with other assets. However, during global financial crises, Bitcoin has also struggled to provide a safe haven for investors.

When the stock market experiences a rare and significant crash that occurs once in decades, Bitcoin, as the leader of the cryptocurrency market, also faces a massive sell-off. Interestingly, as the stock market shows slight signs of recovery, the price of Bitcoin has also rebounded to its previous support level.

The S&P 500 index and Bitcoin have shown a high degree of consistency in their trends. Over the past week, the price of Bitcoin has reacted significantly to several major events, including the Federal Reserve's interest rate cuts and travel restrictions.

MVRV Indicator Analysis

The market value of Bitcoin has historically fallen below 1.0 for the fourth time on the Market Value to Realized Value (MVRV) metric. MVRV is the ratio of the market value of a cryptocurrency to its realized value, which can be roughly understood as the total investment cost of market participants. The realized value reflects the general value consensus of market participants during a certain period and can be seen as the "fair price."

The calculation method of MVRV is as follows: MVRV = Market Value / Realized Value

Market value = Current price × Total issued Bitcoin quantity Actual value = Total value of each Bitcoin in circulation at the time of the last transfer

The actual value compared to the market value has the following characteristics:

1. Excluded the impact of long-term lost or unclaimed Bitcoin on market value.
2. Reflect the true price level through the accumulation of cost price, reducing the impact of emotional factors, while also demonstrating the confidence of long-term holders.

MVRV is an important indicator for determining the transition between Bitcoin bull and bear markets:

• MVRV < 3-3.5: Market price is below "fair value", there is significant appreciation potential, suitable for building positions.
• MVRV > 3.5: The risk of a decline increases, it is recommended to assess the risks and consider taking profits.

It is important to note that a high MVRV does not necessarily indicate a price increase; instead, it may imply an increase in profit-taking pressure.

Current MVRV data shows that Bitcoin's market value has fallen below the cost ceiling, entering the green zone. Throughout Bitcoin's history, this situation is relatively rare and may represent a good buying opportunity.

Conclusion

Bitcoin needs to break through the limitations of the US dollar system and reshape its own positioning, which may require going through a greater crisis. However, most people find it difficult to bear the extreme price fluctuations.

Although the current market situation is not very optimistic, opportunities always favor those who are prepared. As long as we can accurately grasp the changes in the market, it is still possible to achieve considerable returns and realize life goals in this market.