Bitcoin Price Up 13% Despite Ghost Month Uncertainty
Bitcoin Price Surges – Bitcoin’s price has recently recovered by 13% from a low of $49,050. However, with the onset of 2024’s “ghost month,” investors, particularly in the Asian market, remain cautious. This period, from August 4 to September 2, is considered the ghost month according to the Chinese lunar calendar, which is the seventh month of the year. It is traditionally associated with bad luck in Asian cultures and has historically been a challenging time for Bitcoin (BTC) returns.
Understanding the Ghost Month
The ghost month is marked by cultural beliefs that it brings misfortune. Historically, Bitcoin prices have shown negative returns during this period. While this cultural phenomenon doesn’t objectively impact stock or crypto markets, it does influence market psychology and investor expectations. Since 2017, Bitcoin has experienced significant drawdowns each ghost month, reflecting its correlation with this period.
Historical Performance During Ghost Months
As illustrated in the accompanying chart, Bitcoin has faced various levels of correction during past ghost months. Although the overall return on investment (ROI) hasn’t been severely bearish, each period has witnessed notable flash crashes. The exception was in 2021 when the market saw a rally, but Bitcoin later suffered a 23% decline and entered a prolonged bear market. Recently, Bitcoin open interest (OI) fell from $21 billion on July 29 to under $15 billion on August 6, signaling trader caution potentially aimed at avoiding liquidation.
On August 5, as the ghost month began, there was a record amount of Bitcoin sold at a loss. Specifically, over $5.2 billion in Bitcoin was moved within a single hour, affecting coins aged from one day to one week.
Bitcoin MVRV-Z Score and Market Indicators
Bitcoin’s recent drop below $50,000 was influenced by concerns over a potential recession and shifts in U.S. Federal Reserve policies. However, Bitcoin’s Market Value to Realized Value (MVRV-Z) score suggests that the market is still in a euphoric phase. The MVRV-Z score, calculated by dividing market value by realized value, provides insights into BTC demand and supply dynamics. A ratio above 3.7 indicates asset overvaluation, while a score below 1 points to undervaluation.
Historically, Bitcoin has surpassed the 3.7 mark during each bull market phase, as seen in 2013, 2017, and 2021. However, in 2024, it remains below this threshold with a current ratio of 1.40, indicating undervaluation. As of publication, Bitcoin’s price has rebounded to above $57,000, with a 4% increase over the past 24 hours. The relative strength index (RSI) is in the oversold region on the daily chart, suggesting bullish potential in the near term.
Market Outlook and Ghost Month Volatility
Despite the recent rebound, Bitcoin’s price action is known for its volatility during the ghost month. Investors should be prepared for potential market fluctuations as Bitcoin may adjust to fill gaps or downside wicks in the coming days or weeks.
In summary, while Bitcoin’s recent recovery is promising, the ghost month’s historical impact and current market indicators suggest a cautious approach may be prudent for investors navigating this period.
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