Bitcoin Cash (BCH), the cryptocurrency designed for faster and cheaper transactions, has been on a downward spiral in recent weeks. Despite a 5% drop in the last seven days, on-chain metrics suggest BCH might be a bargain for savvy investors willing to bet against the current trend.
One key metric, the Market Value to Realized Value (MVRV) ratio, paints a picture of potential undervaluation. Currently hovering in negative territory for both 30-day and 365-day windows, the MVRV suggests the average BCH investor is underwater. In simpler terms, most BCH holders bought their coins at a higher price than the current market value.
This negativity presents a buying opportunity for some traders who believe the price will eventually rebound. Historically low MVRV ratios have often been followed by price increases, allowing investors to buy low and sell high.
However, not everyone is convinced. Futures traders, particularly those betting on short positions, seem to be anticipating a further decline in BCH’s value. A negative funding rate, which has persisted throughout July, reflects a bearish sentiment – more traders are betting on a price drop than a rise.
Adding to the bearish outlook, BCH recently dipped below its 20-day exponential moving average (EMA), a technical indicator that signifies weakening buying pressure and a potential for further selling. If this trend continues, BCH could revisit its six-month low of $286.
On the other hand, a reversal in the current trend could see BCH rally towards $388. This scenario hinges on a surge in demand for Bitcoin Cash BCH, which would push the price upwards.
The coming days will be crucial for BCH. Will the on-chain signals of undervaluation entice investors, or will the short sellers and the weakening technical indicators prevail? Only time will tell.