In the ever-evolving world of cryptocurrency, investors and analysts are constantly on the hunt for tools that can help predict market cycles, identify overvalued or undervalued assets, and navigate the volatility with more confidence. One of the most respected on-chain metrics in this space is the MVRV-Z Score.
But what is it exactly? How does it work? And why are more seasoned crypto investors turning to it for guidance?
Let’s break it down.
MVRV stands for Market Value to Realized Value. The MVRV-Z Score is a refined version of this ratio that incorporates statistical analysis to give a clearer picture of how far the market value of a coin is from its “fair” value.
- Market Value (MV): This is the current price of a coin multiplied by its circulating supply — essentially, the total market capitalization.
- Realized Value (RV): This is calculated by valuing each coin at the price it last moved on-chain, rather than the current price. It offers a historical perspective on what investors paid for their holdings.
- Z-Score: A statistical method that indicates how far away a data point is from the mean, measured in standard deviations.
Putting it all together, the MVRV-Z Score shows how the current price compares to historical investor costs, adjusted for market sentiment extremes.
This metric is especially useful for long-term investors trying to identify good entry and exit points.
1. Identifying Market Tops
When the MVRV-Z Score is significantly above its historical average — typically above a Z-Score of 7 — it has historically indicated that the asset is overvalued, and market euphoria might be peaking. In Bitcoin’s past cycles, these spikes have often aligned with all-time highs.
2. Spotting Market Bottoms
On the flip side, a Z-Score close to or below 0 often indicates that the coin is undervalued and trading at a discount relative to historical investor cost…
