Capriole Investments creator Charles Edwards has observed Bitcoin’s on-chain metrics and activity which can supply signals for significant market actions.
On October 18th, Edwards tweeted a chart that portrays the MVRV z-score, which utilizes blockchain analysis to identify durations where Bitcoin is incredibly under or overvalued about its “fair value.”
MVRV Predicts Incoming Bullish Run
Murad Mahmudov and David Puell created the MVRV z-score metric to predict when prices are below “fair value.” The equation divides market capitalization by realized capitalization. It is a standard deviation examination that takes out the extremes in the data between market price 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
Late 2020 was the last time the MVRV z-score crossed three. This occurred just before Bitcoin broke its former all-time high of $20K to rise to a new ATH of $65K four months later.
It happened three times during the bull run of 2017 that saw BTC reach several all-time highs. It also occurred in 2014, which saw a cycle peak, and again during 2011, which had another cycle top.
MVRV ratio highs have accompanied these cycle highs on five previous times. If it continues to go up, another cycle peak could be imminent in the next couple of months.
Another hint at further gains comes from a stock-to-flow on-chain price prediction model, which looks to be on track. This version measures the relationship between the supply output and the existing stock available, essentially computing Bitcoin’s value through scarcity.
The mastermind behind the well-liked pricing model, ‘PlanB,’ published an update on October 18th. He revealed that prices had again entered the ‘blue zone,’ or the middle band. The model forecasts a price average of $100k for this cycle though actual prices could range well above or below that.
— PlanB (@100trillionUSD) October 18, 2021
According to the analyst, the model shows that the 2nd leg of this bull run is still waiting to happen. Other notable strategists have likewise predicted that the actual Bitcoin bubble has not begun, as reported by CryptoPotato.
Wilson is a successful crypto analyst and content writer with many years of writing experience in finance and blockchain fields. His interests are in crypto-asset research and technical analysis, Fintech, Blockchain, DeFi, NFTs, and Personal Finance.