Bitcoin has been on a bullish run this year, outperforming popular assets like the Nasdaq 100 and the S&P 500 with a 120% jump in its price. Despite a recent pullback from its all-time high of $108,427 to $97,000, the cryptocurrency is still showing signs of being undervalued according to the Market Value to Realized Value (MVRV) indicator.
The recent pullback in Bitcoin price has affected investors, as seen with spot ETF outflows of $276 million on Friday. However, the MVRV-Z score has dropped to 2.84 from last week’s high of 3.3, indicating that Bitcoin may still be undervalued even after reaching record highs. An MVRV-Z score below 3.7 historically suggests that an asset is undervalued, pointing to potential further growth for Bitcoin.
The MVRV-Z score is calculated by comparing the market value and realized value of a coin, providing insights into its relative value. Bitcoin has shown a score of 3.03 in previous major corrections, indicating a potential strong recovery in the coming weeks. Additionally, strong fundamentals, such as a decrease in the number of Bitcoins in circulation and a rise in the stablecoin market cap, are also supporting Bitcoin’s upward trajectory.
The stablecoin market cap has surged to nearly $210 billion, reflecting increased interest from investors in cryptocurrencies. Bitcoin’s annual inflation rate has also decreased to 1.12% from a high of almost 12% in 2015 due to halving events and rising mining difficulty rates. These positive indicators, coupled with the favorable MVRV score, suggest that Bitcoin is poised for further growth in the long term.
Despite the recent pullback and concerns among investors, Bitcoin’s strong fundamentals and favorable MVRV score point to a potential rally towards $122,000 in the current bullish cycle. Companies like Marathon Digital and MicroStrategy are continuing to accumulate Bitcoins, with MicroStrategy holding over 439,000 coins. The decrease in the number of Bitcoins on exchanges also indicates a trend of investors moving towards self-custody wallets, further supporting Bitcoin’s bullish outlook.
In conclusion, while Bitcoin may experience further pullbacks in the short term, the overall trend suggests that the cryptocurrency remains undervalued and has the potential for significant growth. With strong fundamentals and a positive MVRV score, Bitcoin could continue its upward trajectory in the coming weeks and months, reaching new highs in the cryptocurrency market.
