Bitcoin MVRV Z-Score Drops to Levels Last Seen Near $29,000

On-chain data indicates that the Bitcoin MVRV Z-Score has reached its lowest point in years after the cryptocurrency's price fell below the $80,000 mark.

Key Takeaways:

The Bitcoin MVRV Z-Score has dropped to its lowest levels in years, currently below 1 but still above zero.
This decrease suggests that, on average, investors are seeing lower profitability compared to historical standards.
The last time the score was this low was in October 2023 when Bitcoin was around $29,000.
Recent market trends show diminishing realized profits, reflecting declining liquidity conditions.
As of now, Bitcoin trades near $76,000, down 15% over the last week.

Bitcoin

Understanding the Bitcoin MVRV Z-Score

Recently, analyst Chris Beamish from Glassnode highlighted a significant trend regarding the Bitcoin MVRV Z-Score on social media platform X. This indicator helps determine whether Bitcoin is overvalued or undervalued by comparing its market capitalization with its Realized Cap.

The "Realized Cap" is a valuation method for Bitcoin that calculates the total value of the asset based on the price at which each token was last exchanged on the blockchain. Essentially, this model reflects the total amount of money investors have invested in the cryptocurrency. In contrast, the market cap indicates the current market value held by investors.

The MVRV Z-Score is calculated by taking the difference between the market cap and the Realized Cap and dividing it by the market cap's standard deviation. When the result is significantly positive, it suggests the market cap is much higher than the Realized Cap, indicating that investors are enjoying considerable profits. Conversely, a negative score suggests that many holders are operating at a loss.

The following chart illustrates the Bitcoin MVRV Z-Score trend over recent years:

Bitcoin MVRV Z-Score

As shown in the graph, the Bitcoin MVRV Z-Score has experienced a dramatic decline alongside the latest price drop in the cryptocurrency. Currently, the score is below 1, yet still above zero, signifying that investors are, on average, still in profit. However, this profitability is unusually low compared to historical norms. The last instance when the MVRV Z-Score reached similar levels was in October 2023, when Bitcoin was trading close to $29,000. Beamish remarked, “This signifies a solid reset in unrealized profitability, as the market returns to fair value following the earlier expansion.”

During earlier cycles, such compressions in the MVRV Z-Score often led to further declines. For example, Bitcoin plummeted during the 2022 bear market after staying below the zero mark for a period. It remains uncertain what direction Bitcoin will take this time around.

The recent market downturn has not only impacted unrealized gains for investors, but realized profits have also diminished, according to Glassnode's updates on X.

Bitcoin Realized Profit/Loss Ratio

The 90-day moving average (MA) of the realized profit to loss ratio on the Bitcoin network has fallen to 1.5, approaching the neutral level of 1. Glassnode attributes this decline to “progressively thinner liquidity conditions.”

Current Bitcoin Price

As of now, Bitcoin is trading around $76,000, reflecting a 15% decrease over the past week.

Bitcoin Price Chart

The price appears to have rebounded from yesterday’s lows.