A technical indicator using on-chain data from the bitcoin blockchain is suggesting that the flagship cryptocurrency may be about to undergo a parabolic rally, as BTC historically has surged after it got to its current level.
As first spotted by Capriole Investments founder Charles Edward, bitcoin’s MVRV Z-score has moved up to the 3.0 mark, which it claimed ahead of its previous major bull runs. The metric helps traders identify whether BTC is under or overvalued based on its fair value.
The indicator was reportedly created by Awe & Wonder building on the work of Murad Mahmudov and David Puell, and measures the difference between the cryptocurrency’s total market capitalization and its realized market capitalization divided by the standard deviation of the market cap.
The MVRV Z-score indicator shows by how many standard deviations the market value differs from the realized value. It indicates whether investors are making a profit, with scores above 7 suggesting a high probability a bubble has formed, while scores below zero suggest the market is bleeding, according to Bitcoinition.
Notably, David Puell is also behind another key technical indictor, the Puell Multiple. It measures the ratio of the daily issuance of bitcoin in U.S. dollars and the 365-day moving average of the daily issuance’s value. The indicator ranges from 0 to 10 and if it goes above 8 it shows BTC is overvalued, while below 0.5 it shows its undervalued and may be time to buy.
In late June it dropped below the 0.5 mark, although Puell warned the community at the time that the indicator could be misleading as it is based on BTC’s issuance and the cryptocurrency’s hashrate was heavily affected by China’s crackdown on cryptocurrency mining that month. Nevertheless, the price of bitcoin has since moved from $36,000 to over $62,000.
As CryptoGlobe reported, numerous analysts have revealed they expected the price of bitcoin to hit six figures this year. The managing director of investment advisory firm Midas Touch Consulting Florian Grummes has said he saw BTC surge to $100,000 within six months back in August.
Tom Lee, managing partner at Fundstrat Global Advisors, said he sees a bitcoin price target of $100,00 by the end of the year as “pretty reasonable,” as he expects equities markets to rally when COVID-19 cases start dropping in the United States.
Similarly Adam Back, the CEO of blockchain technology company Blockstream and the third person to ever hold BTC, said BTC hitting $100,000 was “quite possible,” and suggested $500,000 in the long run is feasible.
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