On-chain data shows that Bitcoin has been undervalued for 170 days now, here’s how this figure compares to that during previous bear markets.
Bitcoin MVRV Ratio Stuck Below ‘1’ Since 170 Days Ago
As noted by an analyst in a CryptoQuant afterthe lowest the MVRV ratio has gone to date in this bear is 0.74.
The “MVRV ratio” is an indicator that measures the relationship between Bitcoin’s market capitalization and the realized limit.
Here the “realized capis a BTC capitalization model where the value of each coin in circulation is taken as the price at which it was last moved/sold. All these values are then added up for the entire supply to determine the value of BTC.
This is in contrast to the normal market cap, where all coins are valued at the current Bitcoin price. The usefulness of the realized limit is that it acts as a kind of “real value” for the crypto, as it takes into account the cost basis of each holder in the market.
So, a comparison between the two caps (which is the MVRV ratio) can tell us whether the current BTC price is undervalued or overvalued right now.
The chart below shows the trend in the Bitcoin MVRV ratio over the past few years:
The value of the metric seems to have been below one in recent days | Source: CryptoQuant
As you can see in the chart above, the Bitcoin MVRV ratio has been below a value of 1 for the past few months, meaning that the market cap was below the realized limit.
Historically, the region below 1 is where bear bottoms have been seen in the price of the cryptocurrency. On the other hand, the ratio is greater than 3.7 when crests have been seen.
In the 2014-2015 bear market, the indicator took values below 1 for 300 days, falling to just 0.6 during this streak.
However, the 2018-2019 bear saw a shorter cycle, as it was in this zone for only 134 days. The lowest point, 0.69, was also not as deep as in 2014-15.
In the current Bitcoin cycle, the metric has spent 170 days in this region so far, reaching a low of 0.74.
The MVRV ratio has therefore now been longer in this region than during the previous cycle, but is still nowhere near the length we saw in 2014-15.
The depth of the metric is also not as deep as in either cycle, so it is possible that the bear will go even deeper before Bitcoin hits the bottom of this cycle.
BTC price
At the moment of writing, The price of Bitcoin floating around $17.2k, up 7% over the past week.
BTC has surged up | Source: BTCUSD on TradingView
Featured image from Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com