The Head of Research at CryptoQuant has revealed why it may be too early to call a bottom for Bitcoin, based on the trend in on-chain data.
Bitcoin MVRV Z-Score Has Plunged Under Its 365-Day MA
In a new post on X, CryptoQuant Head of Research Julio Moreno has talked about why Bitcoin may not have reached a bottom yet. “All valuation metrics are in correction territory,” notes the analyst. “It can take more time.”
An indicator that Moreno has cited as an example of this trend is the Market Value to Realized Value (MVRV) Z-Score. This metric basically tells us about how the market cap of the asset compares against its realized cap.
The “realized cap” is an on-chain capitalization model that calculates the total value of the BTC supply by assuming that each token in circulation has its ‘true’ value equal to the spot price at which it was last transacted on the blockchain.
In other words, the realized cap sums up the cost basis of the cryptocurrency’s supply. As such, the model can be interpreted as a measure of the total amount of capital the investors as a whole have put into BTC.
Since the MVRV Z-Score compares the market cap, which represents the value the investors are holding right now, against this initial investment, it tells us about the profit-loss status of the cryptocurrency’s user base.
The MVRV Z-Score is similar to the popular MVRV Ratio, but where it differs from the latter is that it also applies a standard deviation test to pull out the extremes from the data.
Now, here is the chart shared by Moreno that shows the trend in the Bitcoin MVRV Z-Score, as well as its 365-day moving average (MA), over the last few years:
As displayed in the above graph, the Bitcoin MVRV Z-Score has recently witnessed a sharp decline. The reason for this drawdown naturally lies in the crash that the asset’s price has just gone through, which has put many investors into a state of loss.
Despite the plummet, though, the metric remains above the zero mark. Below this level, the overall market enters into a state of loss, so the boundary has historically proven to be an important one for the cryptocurrency.
An important level that the metric has indeed lost, however, is the 365-day MA. As the analyst has highlighted in the chart, past breakdowns of the line have generally led to notable periods of struggle for the Bitcoin price.
It only remains to be seen how long BTC would have to stay under the level this time around, before its price reaches a bottom.
BTC Price
At the time of writing, Bitcoin is floating around $86,300, down more than 11% over the last seven days.
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
Keshav Verma
Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.
Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.
In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.
Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.
Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..
Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.
Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.
As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.
Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.
Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.
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