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FEB 4, 2024

On-chain indicators - MVRV Z-Score

by CryptoEduHub

Utilize on-chain indicators for strategic crypto investments! Today's focus: MVRV Z-Score for Bitcoin. When above '3.7,' it suggests a potential market top (sell), below '1' indicates a possible bottom (buy). Stay informed, trade wisely!
On-chain indicators that can help you identify good buy/sell zones for medium and long-term investment portfolios. Today, MVRV Z-Score.
MVRV Z-Score – is used to assess whether Bitcoin is overvalued or undervalued compared to its “fair value”. Historically, when market value is significantly higher than realized value, this indicates a market high (red zone), and vice versa indicates a market low (green zone).
Technically speaking, the MVRV Z-score is defined as the ratio between the difference between market capitalization and realized market capitalization and the standard deviation of market capitalization.
(Market Capitalization – Realized Market Capitalization) / Standard deviation (Market Capitalization).
MV stands for Market Value (MV) and RV stands for Realized value (VR). The MVRV Z-score, on the other hand, is an indicator calculated based on the standard deviation of the MVRV ratio. That is, it is calculated by dividing the standard deviation of an asset's market value by its MVRV ratio.
How do we read MVRV ratio:
1.    Values over '3.7': Possible Market Top. If the values go above 3.7, it could be reasonable to sell the position off.
2.    Values under '1': Possible Market Bottom. If the values go under 1, it's a negative MVRV value and it is time to take a gradual long position.
Today MVRV – 1.88
Today Z-Score – 1.36
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