Bitcoin underpriced as measured by price metric

Endy Callahan
  • Based on BTC’s MVRV Z-score, it can be implied the digital currency is underrated and it might deal near a major bottom.
  • A violation of a rising trend line support on the 4-hour chart can uncover the recent indicator lower than $4,000.
  • Instant technical charts and diagrams for a price resistance testing show near a $5,900 scope.

Bitcoin now seems to trade at a rather economical rate. Along with the key metric, Bitcoin token has declined by 60 % during the three preceding weeks.

The MVRV metric is a tool used to find periods when the digital currency is overrated or undervalued. On Friday, Bitcoin’s Z-score dropped below zero and stayed at the same level at -0.18 as on Monday, as reported by crypto analytical company Glassnode.

12-month negative figure

In the middle of February BTC boosted at $10,500 then dropped to a 12-months negative figure of $3,867 dated March 13, as shown by CoinDesk’s BTC Price Index.

It is the very first time in 12 months when the Z-score has surprisingly shown a low indicator, signifying the digital currency is now underpriced.

On Thursday as the sell-off in the international stock markets because of coronavirus led to margin calls and financiers were forced to close their positions in BTC and additional markets counting gold and U.S. Treasurys. Thus, the cryptocurrency dropped 39 percent.

MVRV Z-score calculation

BTC’s market value links to the stock in circulation’s overall dollar value, as estimated by the middling cost across foremost exchanges daily.

In the meantime, RV- the realized value is the approximate indicator of the remunerated value for all tokens existing by totaling the tokens’ market value now they moved the latest on the blockchain.

The former one is closer to fair value as it regulates tokens, which have been held for the extended term (HODLing) and a missing token.

Perse, the MVRV Z-score means the difference or aberration from the realized value RV.

 Estimations upon history

Previously, a below-zero green area - MVRV Z-score shown as has shown market bottoms, whereas a number above seven has shown max.

For instance, on November 14 BTC dropped below $6,000, showing the sell-off extension from the record indicator $20,000 high attained in Dec. 2017. By the end of November, it had fallen to $3,400.

The Z-score similarly fell to -0.51 in the second half of November until mid-December. The sell-off lost power near $3,100 in December. Then, following some reinforcement, in April entered a bull market.

The decline of the downside impetus was displayed in the Z-score’s downward turn.

Analyzing the past, the 2014bear market, which began at beyond $1,000 peaks at the end of 2013, ran down near $150 in January 2015. Its Z-score indicator dropped to -0.50. Once more, after several months’ recovery, in November 2015 the crypto broke into a bull market.

If based on history, the present MVRV Z-score of -0.18 implies the digital currency would be trading close to the bottom.

Currently, BTC is trading in the green area near $5,335, showing gain about 18 percent over the previous 24 hours. 

Stock futures recover

The consolidation might be linked with the constructive action in the American stock futures in addition to European and Asian stock markets. Overall, Wall Street’s equity index, with the futures on the S&P 500, and the international stocks benchmark grew approximately 5 percent on Tuesday. This triggered a “limit up.”

BTC has lately been monitoring activity in the stock markets and may perhaps carry on doing so temporarily. Yet, from a technical standpoint, there is room for an extension of the continuing recovery rally.

Daily graph

BTC validated oversold circumstances implied by the 14-day comparative strength index creating a hammer candlestick on Monday. A hammer is a long low wick with a minute body. A hammer expresses seller fatigue. It happens when the salespersons cannot retain prices at the lowermost period of the day.

Accordingly, a gradual move to the $5,900–$6,000 range is expected to happen in the following 24 hours. That range has turned capped upside lately in the digital currency.

4-hour chart

Currency customers have to avoid a drop below the growing trend line support, now at $4,672, which could go against a bullish upper low at $4,435 made on Monday.

Then a violation here might have changed risk in support of a $4,000 fall. The chart demonstrates that the area above $5,900 has shown a very difficult case for the bulls over the most recent four days. Therefore, a persistent passage above this level is required to attract stronger trade pressure.