An important Bitcoin on-chain indicator, MVRV, has breached oversold territory. Historically, this event marked the start of a bull market.
Learn about MVRV and how it works
MVRV stands for Market Value to Real Value, a long-term Bitcoin index. It estimates when the BTC price is below “fair value”. The MVRV Z-Score derivative is used to determine whether Bitcoin is overvalued or undervalued relative to its “fair value,” taking into account the standard deviation of all historical market capitalization data.
The MVRV Z-Score typically moves within the 3 range, but sometimes goes outside that range during extreme bull or bear market conditions.
The blue zone of 0 to -0.5 is interpreted as bitcoin price below “fair value”, the neutral zone of 0 to 7 is considered the “fair value” range, and the red zone of 7 to 9 is interpreted as high bitcoin price on “fair value”.
source: glass node
Historically, when the MVRV Z-Score is in the blue zone, it marks periods when Bitcoin price bottoms out. Conversely, when the indicator is in the red zone, it means that the BTC market has entered an overbought period and is about to peak.
Currently, MVRV has broken out of the buy zone, corresponding to the past price accumulation of BTC.
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Bitcoin breaks out of buy zone
Market analyst CryptoNoob recently published an MVRV chart highlighting the move below the 200-day moving average, noting that the BTC market’s recent January bull run led to a breakout of this area. “Prices always go up quickly after an event like this,” he said.
While this is a promising development, there have been periods of false signals in the past, when the indicator broke out but then retested.
source: Niu Niu
However, with BTC price breaking the long-term logarithmic (red) resistance line from the all-time high of $69,000 reached on October 11, 2021, and the MVRV Z-Score retesting the oversold area (blue line), both events could It happened at the same time, providing strong evidence for the recovery of the bull market.
source: glass node
Recently, the crypto market has been very interesting. Some retail traders doubt that Bitcoin has bottomed in November, while options, on the other hand, strongly suggest that a bottom has indeed been reached.
This discrepancy creates an opportunity for investors to make accurate predictions about the future of the cryptocurrency market. For those who think new lows are just around the corner, a great deal awaits.
A key indicator of this massive trading potential is the increment of 15,000 BTC, with a value of 0.14, that will occur in 2024, using December 23 as a proxy.
Delta is a measure of the change in the price of an option relative to the price of the underlying asset. In this case, a low delta indicates that the option price is less sensitive to changes in the price of Bitcoin, implying lower risk.
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According to Beincrypto