Bitcoin hovering at key support levels with risk of further price correction: CryptoQuant

The price of bitcoin is hovering precariously around key support levels after Monday's market freefall, when crypto majors experienced double-digit drops, followed by Tuesday's slight recovery.

"Bitcoin prices are again hovering at key support levels, with risks of this correction extending further according to valuation metrics," CryptoQuant analysts said.

According to Tuesday's CryptoQuant market report, the Market Value to Realized Value (MVRV) ratio, which compares the market price to the most recent average price bitcoin moved on the blockchain, has fallen below its 365-day moving average, a condition that in previous cycles has signaled an extension of price declines. The report observed that the same key support level was breached amid the COVID-19 crash in March 2020, during the May 2021 downturn and at the start of a bear market in November 2021.

"Investors should be monitoring these valuation metrics to assess the possibility of a price bounce or a further correction," the analysts added.

Bitcoin price has fallen below current bull market support level

Furthermore, the report said that the bitcoin price is now below the trader’s realized price lower band, a level that has served as support through the current bull market.

"If this support fails, the price can go as low as around $40,000, which is the trader realized price minimum band," CryptoQuant analysts added.

Bitcoin traded around $56,380 at publication time, down 1.7% over the past day, according to The Block's Bitcoin Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, increased 2.41% to 108.28 in the same period.