Santiment, a leading on-chain analytics firm, has released data evidencing that the cryptocurrency Shiba Inu is currently underbought while Bitcoin is overbought. This information comes from Santiment’s examination of what’s known as the MVRV Z-Score, a financial tool that measures and compares the realized and market caps of various digital currencies.
Understanding MVRV and its importance in the crypto universe requires a degree of finesse. To put it simply, the “Market Value to Realized Value,” or MVRV, is an on-chain metric that compares the valuation of a cryptocurrency’s market cap to its realized cap. The realized cap is the total market value of a token as if every unit in circulation were sold at the last transaction price.
To detail further, if a cryptocurrency’s last transaction entailed it being passed on from one party to another, this would set the coin’s cost basis. In other words, the realized cap represents an aggregate of all circulating tokens’ cost basis. This paints a clear picture of the total capital that investors pour into securing the asset’s supply. Meanwhile, the market cap showcases the value that these investors are holding at any given moment.
By default, the MVRV Z-Score, which encompasses both the realized cap and the market cap, gives a comprehensive picture of collective investors’ profit or loss. Also significant is this unique Z-Score. This often-utilized indicator incorporates the difference between the market cap and realized cap, ultimately dividing it by the standard deviation of the market cap throughout the entire asset history.
To bring this all into perspective, let’s examine the ongoing scenario. Currently, major players in the crypto game are operating within what Santiment has termed ‘zones.’ These zones, defined by the fluctuating MVRV Z-Score, gauge the distance from the asset’s fair market value. Familiar cryptocurrencies such as Shiba Inu and Uniswap have witnessed their indicators plunge to -1.55 and -1.96 respectively, labeling them as ‘underbought’ within these interpretive zones.
Moreover, these lower MVRV Z-Score values reveal that the market cap of these tokens is considerably lesser than the realized cap, suggesting investors are widely in loss. But there’s a light at the end of the tunnel. When minimum profit holders are left, the potential for price corrections to escalate becomes unlikely.
This could be why the fall of this indicator below the -1 point labels these assets as undervalued. Conversely, a rise above the value of 1 could suggest an overvaluation. Recently, Bitcoin, Ethereum, and Toncoin have found themselves oscillating within this spectrum, sparking fears among crypto lovers of a possible downturn. On a more optimistic note, Shiba Inu and Uniswap could be setting the stage for a price increase.
On a final note, keep an eye on the movement of Shiba Inu in the crypto market. As of this report, the currency is trading around $0.0000171, witnessing a 2% up share over the past week.