Bitcoin MVRV Z-Score Compresses to Levels Last seen near $29,000

Ben Graham · February 5

On-chain data shows the Bitcoin MVRV Z-Score has fallen to its lowest level in years following the price crash below the $80,000 level.

Bitcoin MVRV Z-Score Has Plummeted Recently

In a new post on X, Glassnode analyst Chris Beamish has discussed about the latest trend in the Bitcoin MVRV Z-Score, an indicator that aims to estimate whether the asset is overvalued or undervalued based on how its market cap compares against its Realized Cap.

The “Realized Cap” is a capitalization model for BTC that calculates its total value by assuming that the value of each token in circulation is equal to the price at which it was last transacted on the blockchain. In short, what this model represents is the amount of capital that investors as a whole have put into the cryptocurrency. In contrast, the market cap represents the value being held by them in the present.

The MVRV Z-Score takes the difference between the two and divides it by the standard deviation of the market cap. When the value of the metric is highly positive, it suggests that the market cap is significantly higher than the Realized Cap. In other words, it indicates the investors are in a notable amount of profit. On the other hand, the indicator being inside the negative zone implies the dominance of loss among holders.

Now, here is the chart shared by Beamish that shows the trend in the Bitcoin MVRV Z-Score over the last several years:

Bitcoin MVRV Z-Score Compresses to Levels Last seen near ,000 - ExpertFX School

As displayed in the above graph, the Bitcoin MVRV Z-Score has faced a steep drop as the cryptocurrency’s price has gone through its latest drawdown. The metric has now slipped below the 1 level, although its value still remains above zero, meaning investors continue to be in net profits.

The degree of profitability, however, is quite low compared to the average for the last few years. The last time that the MVRV Z-Score was at levels this low was in October 2023, when the asset was still trading near $29,000. “This is a solid reset in unrealised profitability, with the market reverting toward fair value after the prior expansion,” noted the analyst.

In the previous cycle, when the MVRV Z-Score saw compression to similar levels, Bitcoin went on to slide further as the 2022 bear market tightened its grip. The cryptocurrency eventually reached its lows after a period of stay in the zone below the 0 level. It now remains to be seen what trajectory the coin will follow in this cycle.

The latest market downturn hasn’t only affected unrealized investor gains, realized profits have also shrunk, as pointed out by Glassnode in an X post.

The 90-day moving average (MA) of the ratio between realized profits and losses on the Bitcoin network has declined to 1.5, not far from the neutral 1 level. According to Glassnode, this reflects “progressively thinner liquidity conditions.”