- Bitcoin undervalued for 170 days, longest since the 2014-15 bear market.
- MVRV ratio indicates potential for significant market rebound.
- Current cycle’s depth of undervaluation is less pronounced compared to previous cycles.
The prolonged period of undervaluation of Bitcoin has kept analysts and investors intrigued with the coin’s market dynamics. On-chain data indicates that Bitcoin has been undervalued for a record 170 days, which has sparked speculations about a potential bullish rise.
The MVRV ratio, an important measure that evaluates the relationship between Bitcoin’s market cap and realized cap, is the primary data that analysts are using to predict a potential bull market. This ratio can be used as a measure to determine if the price of Bitcoin is above or below its perceived value.
An MVRV ratio less than one indicates a period of undervaluation of Bitcoin, which historically has frequently preceded major market rallies. On the other hand, the ratio typically indicates possible market peaks when it rises beyond 3.7. According to cryptoQuant, past bull markets peaked at higher values of 4.83 and 3.97 indicating potential bull run considering that bitcoin has currently reached 2.78.
The MVRV ratio plummeted below 1 for a period of 300 days during the 2014–15 bear market, peaking at 0.6 during that time. The bear market of 2018–19, on the other hand, went through a shorter cycle, with the ratio falling below 1 for 134 days and peaking at 0.69.
With the MVRV ratio hitting a low of 0.74, the data indicates that Bitcoin has now been undervalued for 170 days in the current cycle. Despite being longer than the last cycle, the level of undervaluation is still relatively low.
Regarding the implications of Bitcoin’s prolonged undervaluation, analysts are still conflicted on the future of the market. Citing previous patterns, some perceive it as a sign of an impending bull run. Some analysts, however, forecast that the present cycle might be different from earlier ones hence predicting a potential bull run is not possible.
Ultimately, the 170-day period of continuous undervaluation of Bitcoin highlights the dynamically changing nature of the cryptocurrency market. Although past trends provide insightful information, the current cycle offers special opportunities and challenges that require stakeholders to exercise caution when managing market uncertainties.
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