Another key on-chain indicator of Bitcoin has changed. What signal does this convey?

According to Glassnode’s Bitcoin MVRV-Z score indicator, Bitcoin is about to cross the red line . The last time this trend was seen, the price of Bitcoin more than tripled.

What is Bitcoin’s MVRV-Z Rating and is it important?

Bitcoin’s MVRV-Z score is often used to measure whether an asset is undervalued or overvalued. When this indicator reaches the top of the red zone shown below, it indicates that the market may be overvalued .

Currently, Bitcoin’s MVRV-Z score shows that it is about to enter the red zone. When it appeared in the last such up cycle, Bitcoin subsequently rose more than twice.

Glassnode researchers explain, “The MVRV-Z score is used to assess how overvalued or undervalued an asset is relative to its ‘fair value,’ highlighting the deviation between its market capitalization and realized value.

When the market value is significantly higher than the actual value, the indicator will indicate that the market value is reaching a market top (shown in the red area on the chart), and the opposite is the case, indicating a market bottom (shown in the green area).”

This trend occurs because during a bull market cycle, the demand for Bitcoin exceeds the supply. However, due to the fear of missing out (FOMO) market, this trend usually continues after reaching a seller's market .

If BTC follows previous market cycles, most prominent investors predict that the price of Bitcoin, the dominant cryptocurrency, could reach $100,000 by the end of the year.

“ The first time Bitcoin entered the red zone since December 2017, 2x the amount of money pumped into Bitcoin. Can we see something like this happen again? ” wrote the trader who goes by the pseudonym “LilMoonLambo.”

So what happens next?

In the short term, it is key for Bitcoin to stay above $54,000, a level that has become a support point.

BTC’s price rose to $54,000 overnight, with liquidity playing a role. The strong recovery trend shows that there is strong buyer demand in the market.

Stablecoin inflows are increasing and the Coinbase premium has also recovered. The combination of these two factors suggests that Bitcoin’s bull trend is intact.

When the premium disappeared, BTC saw a pullback over the past month. However, as long as the premium remains high, it indicates that U.S. buyers are accumulating and the bull trend is likely to resume.

BtC is currently in the price discovery phase, which means it will hit a new all-time high. We believe that when its price reaches the top, $54,000 and $50,000 will be key macro support points .

The original text comes from newsbtc, with some deletions, and translated by Blockchain Knight. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.