Following Bitcoin's sharp decline last week, an on-chain indicator often used to determine cyclical positions has regained attention. Data shows that the MVRV Z-Score is approaching the area where many bear markets have historically bottomed out, indicating that the market price is nearing its on-chain "realized value."
Indicators are approaching previous bottom ranges.
The MVRV Z-Score is used to compare the deviation between Bitcoin's current market capitalization and its realized market capitalization. Realized market capitalization is usually calculated based on the price of each Bitcoin at the time of its last on-chain transfer, and is therefore often regarded as a reference that is closer to the cost of holding or fair value.
When market prices are significantly above this level, it often indicates overvaluation; when prices fall back and approach or even fall below this level, it suggests the market has entered an undervalued range. The article cites BitBo data, stating that the indicator is currently around 0.24, approaching a position historically considered part of the "green zone," which typically extends from near 0 to slightly below 0.
Price close to on-chain fair value
Historically, the major cycle lows of 2011-2012, 2014, 2018, and 2022 all occurred after this indicator touched or briefly fell below 0. In previous market cycles, this level often corresponded to the end of selling pressure, followed by a recovery phase.
The significance of these metrics lies not in providing a precise price point, but in helping to observe Bitcoin's position relative to its historical cycles. Compared to short-term fluctuations, the MVRV Z-Score places greater emphasis on whether the current market capitalization has been significantly compressed relative to the on-chain cost base.
The portfolio structure is not yet fully in place.
However, the article also points out that looking at the MVRV Z-Score alone is not enough to confirm that the market has bottomed out. Another signal worth noting is whether the profit and loss situation of long-term holders and short-term holders is converging.
In on-chain data, long-term holders (MVRV) are wallets that have held the token for more than 155 days, while short-term holders (MVRV) are wallets that have held the token for less than 155 days. Historically, when the gap between the two narrows significantly, it tends to be closer to a complete cycle low.
Currently, the MVRV for short-term holders is approximately 0.84, while the MVRV for long-term holders is approximately 1.29. This means that long-term holders still hold a significant amount of unrealized profits, and the floating profits in the market have not yet been fully cleared. Based on past cyclical experience, Bitcoin may still face further downward pressure under these conditions.
Overall, following the recent sharp decline, some conditions that historically corresponded to the starting point of a recovery are emerging, but the portfolio structure has not yet fully reached a typical bottoming pattern. Whether the market has completed its bottoming process remains to be seen and requires continued observation of subsequent selling pressure and changes in on-chain positions.
