On-Chain MVRV Indicator Illuminates Bitcoin Bull Market Path

The crypto market is always changing, with prices rising and falling regularly. However, a recent development could signal the start of a long-term bull market for Bitcoin and altcoins.

A key Bitcoin indicator on the chain, MVRV, has broken out of oversold territory, and historically this event has signaled the beginning of a bull market.

Understand MVRV and how it works

MVRV stands for Market Value to Realized Value ratio, a long-term Bitcoin indicator. It estimates when the price of BTC is below the so-called “real value”. Its derivative, the MVRV Z-Score, is used to determine whether Bitcoin is overvalued or undervalued relative to its “true value”, taking into account the standard deviation of all historical market value data.

The MVRV Z-Score usually moves in three ranges, but it can occasionally move out of them in extreme bull or bear market conditions.

The green area between 0 and -0.5 is interpreted as the Bitcoin price being below “fair value”, the neutral area between 0 and 7 is considered the “fair value” area, and the red area between 7 and 9 is interpreted as Bitcoin the price is above “real value”.

Historically, when the MVRV Z-Score was in the green range, it signaled a period of Bitcoin price bottoming. Conversely, when the indicator was in the red area, it signaled an impending peak and overbought period in the BTC market.

Currently, MVRV has broken out of the buy range, which has corresponded with the accumulation of the BTC price earlier.

Bitcoin is moving out of the buying zone

Cryptocurrency Market Analyst @CryptoNoob_1 recently tweeted a chart of MVRV, highlighting the dips below the 200-day moving average and pointing out that the recent January gains in the BTC market led to a breakout from this area. He said that “the price has always risen rapidly after this event.”

While this is a promising development, there have been periods of fakeouts in the past, where the indicator broke out but later returned to retest it.

Nevertheless, with BTC price breaking out of the long-term logarithmic resistance line (red) since the all-time high of $69,000 on November 10, 2021, and the MVRV Z-Score heading for a re-test of the oversold area (blue line ), both events could occur simultaneously, providing strong evidence for the resumption of the crypto bull market.

Skepticism prevails

The crypto market has experienced an interesting dislocation lately. On the one hand, some retail traders are skeptical that Bitcoin bottomed out in November. On the other hand, option contracts signal a strong confidence that the bottom has indeed been reached.

This dichotomy has created a unique opportunity for investors who can make accurate predictions about the future of the crypto market. For those who believe new lows are on the horizon, a big trade awaits.

A key indicator of this potential for a good trade is the delta for 15,000 BTC, priced at 0.14 going into 2024, using December 23 as a proxy.

This delta is a measure of the change in the option’s price in relation to a change in the underlying asset’s price. In this case, a low delta indicates a lower sensitivity of the option price to changes in the price of Bitcoin, which implies a lower risk.