Key Insights:
- The MVRV Z-Score, currently at 2.4, is still significantly lower than previous market peaks, typically above 7, suggesting further upside potential for Bitcoin.
- Historical trends indicate that Bitcoin’s market value significantly exceeding its realized value usually precedes major peaks, but current metrics imply that the market has yet to reach such heights.
Bitcoin reached an all-time peak just above $112,000 on Wednesday, although the increase from previous highs was modest. The bullish adoption from corporations actively adding Bitcoin to their balance sheets supports this growth outlook.
On-chain data reveals that Bitcoin has more potential for gains compared to past cycles. The MVRV Z-Score serves as a valuable tool in this analysis, helping assess if Bitcoin is overvalued or undervalued relative to its fair value.
BTC’s bullish pattern
BTC’s bullish pattern. (cjweaver13/Pixabay)
Unlike traditional z-scores, the MVRV Z-Score compares market value to realized value. When market value, derived from the spot price multiplied by supply, notably exceeds the realized value—representing total capital flowing into the asset—it has historically indicated market peaks. Conversely, when market value is significantly below realized values, it often corresponds with market bottoms.
Currently resting at 2.4, historical data from bear markets shows lower scores below zero, noted in 2015, 2019, and 2022. Peak cycles, however, have recorded scores of 7 or higher, as observed in 2017 and 2021, providing a critical context for current market evaluations.
In conclusion, despite being merely one indicator, it strongly suggests that Bitcoin has considerable room for further growth relative to previous cycles.
Read more: This Chart Points to a 30% Bitcoin Price Boom Ahead: Technical Analysis
