Bitcoin is still stagnant in terms of its price action and has not made any significant jumps in the past few weeks. However, the coming weeks could see a change in the digital asset’s trajectory as the Bitcoin MVRV ratio could herald a bottom signal.
Bitcoin MVRV ratio touches 2019 lows
The co-founder and CEO of on-chain data analytics company Cryptoquant recently took to Twitter to share an interesting chart. The image showed that the Bitcoin MVRV ratio has fallen to levels not seen since 2019 – three years ago.
Now the Bitcoin MVRV ratio compares the market capitalization of BTC with its realized value. This helps determine whether the digital asset is actually trading at a fair value, whether it is overvalued or currently undervalued. The lower the value falls, the more undervalued BTC is.
The times when the BTC-MVRV ratio has fallen to levels similar to that shown in the Cryptoquant chart was when the market bottomed. This is the case during bear markets, when prices fall drastically for an extended period of time before bouncing back up.
MVRV ratio falls to 3-year low | Source: Cryptoquant
Looking at the chart, it’s easy to see when the MVRV ratio was so low when the previous bottom was hit. Once in 2015 and the other time in 2019, a few months before that bull market was triggered.
If history is anything, then this chart shows that BTC has already bottomed or is very close to it. However, based on previous timelines, when the MVRV ratio went that low, it could take at least a few months before another bull market is triggered.
What to do with such trends?
Because the Bitcoin MVRV ratio is so low, it presents investors with a unique opportunity to buy the digital asset at one of the lowest possible prices ahead of another bullish rally. BTC, so undervalued for the past several years, only ended in a bull cycle where the price started a new one all-time high reached.
While this isn’t the bottom, it can be very close to it, so even if the price ends up falling lower, investors might not incur heavy losses. The lack of interest in the market has weighed on investor sentiment, but it brings into play a strategy suggested by legendary investor Warren Buffett: “Be greedy when others are afraid.”
BTC is trending at $16,855 at the time of writing. It is up 0.64% in the last 24 hours and 1.21% in the last 7 days.
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Source: Crypto News Deutsch