After last week’s sharp wave of selling, one of the most closely watched on-chain indicators in the Bitcoin market has neared a region historically associated with bear market bottoms. This indicator, known as the MVRV Z Score, measures the difference between Bitcoin’s market value and its realized value.
MVRV Z Score draws focus again
This metric tracks how statistically stretched Bitcoin’s current market valuation is compared to its realized value, which is calculated from the prices at which coins last moved across the network. When the market price rises significantly above the realized value, Bitcoin is generally considered expensive by historical standards. Conversely, when the price nears or falls below the realized value, it reflects a relatively cheap zone.
In past market cycles, significant bottom formations coincided with periods when the MVRV Z Score touched or briefly dipped below zero. This pattern emerged during the first major crash between 2011 and 2012, then again in 2014, at the end of 2018, and most recently in the second half of 2022. After the sub-zero level in 2022, Bitcoin entered a strong upward trend that lasted nearly three years.
Mini glossary: The MVRV Z Score is a metric showing how overextended Bitcoin’s market price is relative to its on-chain cost basis. The realized value reflects the average price at which every coin in the network last moved and is widely watched as a fair value reference by many analysts.
According to data from BitBo, the MVRV Z Score is currently sitting at 0.24. This value hovers just above the historically significant green zone, which starts just above zero and extends slightly below it. In other words, the indicator has approached a territory that investors often view as a potential accumulation zone.
BitBo’s data reveal that with the MVRV Z Score at 0.24, it is just above the historically significant green region—a level that, in past market cycles, has coincided with major bottoms.
Wallet data still lacks a clear bottom signal
However, on-chain data suggests that the ultimate market bottom may not have formed yet. Specifically, two different MVRV indicators, tracking profitability for both short-term and long-term holders, have yet to converge. In previous cycles, large market lows were established when the gap between these two metrics closed.
Here, long-term holders are defined as those addresses holding coins unmoved for at least 155 days, while short-term holders are those holding for less than that period. Historically, when profitability levels between these two groups closed in, selling pressure was considered to have been substantially cleared from the market.
Long-term holders remain in profit
At present, the short-term holder MVRV sits at 0.84, while the long-term holder MVRV stands notably higher at 1.29. This gap suggests that long-term investors are still sitting on significant unrealized profits. For this reason, some analysts think additional downward movement in Bitcoin could still occur before a classic bear market bottom forms.
While perfectly timing market bottoms is virtually impossible, certain conditions that typically precede a rebound have reappeared after last week’s selloff erased hundreds of billions of dollars from the crypto market’s total value. Yet, despite a strengthening bottom signal on the on-chain side, a definitive turnaround has not been confirmed.
