Bitcoin’s “investor tool” metric, which is designed as a tool for long-term investors to find periods where prices may be approaching cyclical tops or bottoms, has started flashing a buy signal for the first time since the COVID-related crash of March 2020.
As pointed out on Twitter by Checkmate, in a tweet first spotted by Cointelegraph, a lead on-chain analyst at cryptocurrency analytics firm Glassnode, the metric has recently entered “buy the dip” territory after accurately signaling the top of Bitcoin’s bull run last year.
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The tool, according to Glassnode, uses two simple moving averages (SMAs) as the “basis for under/overvalued conditions.” It uses a 2-year moving average and its 5x multiple, with BTC’s price dropping below the 2-year moving average historically generating “outsized returns” and signaling bear cycle lows.
On the other hand, BTC’s price going above its 2-year moving average 5x multiple has “been historically signalled bull cycle tops and a zone where investors de-risk. The metric was created by Philip Swift, founder of LookIntoBitcoin, in a bid to deduce when BTC would likely be overbought or oversold.
It’s worth noting a moving average is an indicator commonly used in technical analysis that helps smooth out price data by creating a constantly updated average price.
As CryptoGlobe reported, cryptocurrency investors have been buying the Bitcoin and Ethereum ($ETH) price dips even as their prices plunge, as data from Purpose Investments’ cryptocurrency exchange-traded funds (ETFs) shows their assets under management have risen throughout the market downturn.
The Purpose Bitcoin ETF, which was launched in February 2021, has been seeing significant inflows over the last few days, to the point its holders have risen to surpass 43,700 BTC. The ETF notably purchased over 2,000 BTC per day on more than one occasion.
According to CryptoCompare’s latest Digital Asset Management Review report the firm purchased 6,227 Bitcoin and 81,436 Ethereum worth $183 million and $149 million respectively for their Bitcoin and Ethereum products.
Last month, JPMorgan said that cryptocurrencies are now the bank’s preferred alternative asset, as a major sell-off in the cryptocurrency space after the collapse of the Terra ecosystem hurt cryptos more than other alternative investments including private equity and private debt.
To JPMorgan’s analysts, the fair price for BTC is $38,000, Investors have moved away from riskier assets including cryptoassets this year over rising inflation and interest rates and Russia’s invasion of Ukraine.
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
Featured image via Unsplash
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