Bullish? On-chain Signal Previously Preceding Parabolic Bitcoin Runs Flashes
Capriole Investments founder Charles Edwards has been observing Bitcoin’s on-chain activity and metrics which can often provide signals for major market moves.
On Oct. 18, he tweeted a chart that depicts the MVRV z-score which uses blockchain analysis to identify periods where Bitcoin is extremely over or undervalued relative to its “fair value.”
MVRV Predicts Incoming Bullish Run
The metric was created by Murad Mahmudov and David Puell by dividing the market capitalization by the realized capitalization for getting a sense of when prices are below “fair value.” The z-score is a standard deviation test that pulls out the extremes in the data between market value and realized value.
Historically every time MVRV z-score reclaimed 3.0, #Bitcoin went on a parabolic price run for the next 1-2 months.
Bitcoin just reclaimed 3.0 pic.twitter.com/luCBnubYIs
— Charles Edwards (@caprioleio) October 18, 2021
The last time the MVRV z-score crossed 3 was in late 2020, just before BTC broke above its previous all-time high of $20K to surge to a new one of $65K four months later.
It happened three times during the 2017 bull run that saw Bitcoin print several new all-time highs. It also occurred in 2014, which saw another cycle peak, and again during 2011, which had another cycle top.
MVRV ratio highs have coincided with these cycle peaks on five previous occasions, so if it continues higher, another one could be on the cards in the next few months.
Stock-to-Flow Status
Another on-chain price prediction model is also right on track and hinting at further gains. The stock-to-flow model measures the relationship between the production of supply and the current stock available, essentially calculating Bitcoin’s value through scarcity.
The brainchild behind the popular pricing model, ‘PlanB,’ posted an update on Oct. 18 showing that prices had reentered the ‘blue zone,’ which is the middle band of the range. The model predicts an average price of around $100K for this cycle though actual prices could range way above or below that.
Back in blue https://t.co/ikLpgKX5gi pic.twitter.com/oVavXRQXFi
— PlanB (@100trillionUSD) October 18, 2021
The analyst has previously stated that the model indicates that the second leg of this bull run has yet to materialize fully. Other popular strategists have also predicted that the real Bitcoin bubble hasn’t really started, as reported by CryptoPotato.
OhNoRipple via https://www.ohnocrypto.com/ @Martin Young, @Khareem Sudlow