Bitcoin (BTC) etched a fresh record high, slightly surpassing $112,000 on Wednesday. This gain, while positive, represents a relatively modest increase compared to the previous peak. Market confidence remains strong, fueled in part by corporations integrating Bitcoin into their corporate asset holdings.
Analysis of blockchain data suggests that Bitcoin’s price could climb further when viewed in relation to prior market cycles. One key indicator used in this evaluation is the MVRV Z-Score, a metric designed to determine whether Bitcoin is currently overvalued or undervalued when compared to its perceived intrinsic value.
The MVRV Z-Score distinguishes itself from a typical z-score by comparing the market capitalization to the realized capitalization of Bitcoin. A market cap significantly exceeding the realized cap, calculated using the spot price multiplied by the total supply, historically signals market tops (indicated by the red zone). Conversely, a market cap considerably lower than the realized cap has often pointed to market bottoms (indicated by the green zone).
Specifically, the MVRV Z-Score is calculated by subtracting the realized cap from the market cap, then dividing the result by the standard deviation of the market cap. This standard deviation is calculated cumulatively from the very first available data point up to the present, creating a long-term perspective.
The current MVRV Z-Score stands at 2.4. Looking back, Bitcoin has historically recorded scores below zero during bear market lows, as observed in 2015, 2019, and 2022. In contrast, cycle peaks have tended to coincide with scores of 7 or higher, as was seen in 2017 and 2021, according to data from Glassnode.
While this is just one piece of data to consider, it suggests that Bitcoin might have substantial upward potential compared to previous market cycles.
Further Reading: Technical Analysis Suggests 30% Bitcoin Price Increase Possible