The data from an on-chain indicator suggests that the majority of altcoins have dropped into the historical “danger zone,” which could be a bearish sign. Altcoins seem to be overbought with trader profits shooting up recently, according to a post by the on-chain analytics firm Santiment. The MVRV ratio, a Market Value to Realized Value indicator, tracks the ratio between market cap and realized cap for cryptocurrencies. Realized cap is based on the last transaction price of the token, serving as a cost basis for investors. The MVRV ratio compares market cap with realized cap to determine the profitability ratio for investors.
Historically, a high MVRV ratio has signaled that an asset is overheated, while low profits have indicated an underbought status. Santiment has defined “opportunity” and “danger” zones based on this pattern. The chart shows that most altcoins are currently in the danger zone, suggesting high profits for traders. Few assets are in the opportunity zone, indicating an opportunity for accumulation. However, Santiment warns against significant corrections but suggests a higher risk than average for buying or opening new positions during the current market surge.
Ethereum has recently decoupled from Bitcoin, seeing a price surge above $2,900 while Bitcoin remains stagnant. The price surge for Ethereum may be a positive sign of bullish momentum. The market trends for altcoins based on the MVRV ratio indicate potential risks in the current market conditions. It is essential for investors to be cautious and conduct thorough research before making any new investments in the crypto market. Santiment’s analysis provides valuable insights into market trends and signals that could help traders make informed decisions about their investments.
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