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MVRV Z-Score

Updated: Apr 11, 2023

Definition:

MVRV Z-Score is a metric that compares the current market value of a cryptocurrency to its historical value.


The MVRV Z-Score gives an indication of how far the current market value is from the historical average, and can be used as a measure of overvaluation or undervaluation.


MVRV Z-Score is calculated by taking the difference between the current market capitalization and realized capitalization, and then dividing that number by the standard deviation of the historical market capitalization.


For example: If the current market value of Bitcoin is much higher than its historical value, it could be considered overvalued.


In the photo below, you can see the MVRV Z-Score since 2011. One can note the peaks in the MVRV Z-Score have marked near market peaks.



What to watch for:


Extreme peaks: When the MVRV Z-Score reaches exceptionally high levels, typically above 7, it is likely that the asset is at or nearing a market top. If the MVRV Z-score remains high for an extended period of time, it may indicate that the market is becoming increasingly overvalued.


Extreme lows: When the MVRV Z-Score reaches exceptionally low levels, typically below 0, it is likely that the asset is at or nearing a market bottom. If the MVRV Z-score remains low for an extended period of time, it may indicate that the market is becoming increasingly undervalued.



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