Bitcoin Hits New All-Time Highs, But On-Chain Data Suggests Rally Has Room to Run

Bitcoin (BTC) set a new all-time high above $112,000 on Wednesday, though the latest increase was modest compared to earlier peaks. The milestone comes amid growing corporate adoption, as more public companies continue adding bitcoin to their balance sheets.

Yet despite bitcoin’s record prices, on-chain metrics suggest the rally may still have further upside compared to prior market cycles. A key indicator pointing to this potential is the MVRV Z-Score, a metric used to gauge whether bitcoin is overvalued or undervalued relative to its “fair value.”

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Understanding the MVRV Z-Score

Unlike a standard z-score, the MVRV Z-Score compares bitcoin’s market value—the total network value calculated as spot price multiplied by circulating supply—to its realized value, which represents the cumulative capital invested in the asset.

Historically, when market value far exceeds realized value, bitcoin has often been near major market tops (the so-called red zone). Conversely, when market value sits well below realized value, it tends to signal market bottoms (green zone).

Technically, the MVRV Z-Score is calculated as: MVRV Z-Score=Market Cap−Realized CapStandard Deviation of Market Cap\text{MVRV Z-Score} = \frac{\text{Market Cap} – \text{Realized Cap}}{\text{Standard Deviation of Market Cap}}MVRV Z-Score=Standard Deviation of Market CapMarket Cap−Realized Cap​

The standard deviation is measured from bitcoin’s inception to the present, providing a long-term perspective.

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Current Market Signals

As of now, the MVRV Z-Score sits at 2.4, well below levels typically associated with overheated markets. For context, bitcoin’s past bear market lows have seen scores below zero (e.g. in 2015, 2019, and 2022), while historic cycle tops occurred at readings of 7 or higher, as was the case in 2017 and 2021, according to Glassnode data.

While the MVRV Z-Score is just one piece of the puzzle, its current reading indicates that bitcoin may still have significant room for growth before approaching levels seen during prior market tops.

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