Bitcoin is about to cross the red zone, according to Glassnode’s Bitcoin MVRV Z-Score indicator. The last time BTC saw this trend, it was up double the current price.
What is the Bitcoin MVRV Z-Score and why is it important?
The Bitcoin MVRV Z-Score Indicator is typically used to measure whether an asset is undervalued or overvalued.
When this indicator hits the top of the red zone shown below, it indicates that the market is likely to be overvalued.
Currently, the BitcoiN MVRV Z-Score indicator is entering the red zone. In the previous cycle, BTC then recovered more than twice.
The Bitcoin MVRV Z-Score. Source: Glassnode
Researchers at Glassnode explain:
“The MVRV-Z-Score is used to assess when an asset is over- or undervalued in relation to its“ fair value ”, which is underlined by the difference between its market capitalization and the realized upper limit. If the market value is significantly higher than the realized value, it historically indicates a market peak (red zone), while the opposite indicates a market lows (green zone). “
This trend occurs because Bitcoin gets overbought during a bull cycle. However, it often extends after reaching the overbought territory as the fear of missing out (FOMO) resumes.
If BTC follows earlier cycles, the price of the dominant cryptocurrency could reach $ 100,000 by the end of the year, which is the price prediction of most prominent investors.
A pseudonymous trader named “LilMoonLambo” wrote:
“$ BTC is entering red territory for the first time since December 2017. When we tested the red area for the first time in 2017, we pumped another 2x. Could we see something similar again? “
What happens next?
In the short term, it is vital for Bitcoin to stay above the $ 54,000 level that has become an area of support.
The price of BTC fell to $ 54,000 overnight, opening up an area of liquidity. The strong recovery from this region shows that there is strong buyer demand in the market.
The inflows of stable coins are increasing and the Coinbase premium has returned. The combination of these two factors signals that the Bitcoin bull trend is intact.
The price of bitcoin. Source: BTCUSD on TradingView.com
As the premium disappeared, BTC saw pullbacks last month. As long as the premium stays high, which indicates US buyers are accumulating, the bull trend would likely continue.
BTC is currently in the pricing process, which means it continues to make new all-time highs. When making a spike, it is important that BTC defend the USD 54,000 and USD 50,000 levels as major macro support areas.
