Bitcoin (BTC) On-Chain Analysis: Market Metrics Show Capitulation

Be[in]Crypto takes a look at Bitcoin (BTC) on-chain indicators, focusing this week on the Market-Value-To-Realized-Value (MVRV), Reserve Risk and Puell Multiple.

MVRV Z-Score

MVRV is defined as the ratio between the market and realized capitalization levels. Values higher than one show that the market cap is larger than the realized cap. The MVRV Z-score subsequently uses a standard deviation in order to normalize the values.

Historically, values between 7 and 9 have coincided with market cycle tops, will values below 0 with bottoms. The indicator has been falling since Oct. 2021, and turned negative on June 13, 2022. 

Besides March 2020 (black circle), the other times in which the indicator crossed into negative territory required another eventual flush prior to the bottom.

In 2012, the bottom was reached two months after the indicator first moved into negative territory.

In 2015, it was reached twelve days after the indicator first moved into negative territory. In 2018, it was reached roughly one month after the indicator first moved into negative territory. 

So, according to this indicator, there will be another downward movement prior to the bottom. 

Reserve Risk

The Reserve Risk is a cyclical BTC on-chain indicator that measures the confidence of long-term holders relative to the current asset price.

When confidence is high but the price is low, reserve risk gives low values. These times have historically offered the best risk to reward ratios.

Specifically, values below 0.002 (green) are considered to provide favorable risk to reward ratios. Conversely, those above 0.02 (red) are considered to provide disadvantageous risk to reward ratios.

Throughout the price history of BTC, every single market cycle top has been reached while reserve risk provided a reading above 0.02. Conversely, every single bottom has been reached below 0.002. 

Reserve risk crossed below 0.002 on Jan. 2022 and has been falling since. The indicator reached a low of 0.001 on June 16. 

The current low is low is the lowest value reached since 2015. Therefore, it is lower than that during the Dec. 2018 bottom (black circle). 

So, according to this indicator, it is possible that BTC has bottomed.

Puell Multiple 

The Puell Multiple is an on-chain indicator that is created by dividing the value of all minted coins by a yearly moving average.

Values between 4 and 10 (red) are normally associated with market cycle tops. Conversely, those between 0 and 0.5 are associated with market bottoms.

The indicator has been falling since the beginning of the year, but is still at 0.6. So, it has not yet reached a level associated with a bottom. 

The 2015 and 2019 bottoms (black circles) were reached close to 0.35.

Similarly to MVRV, this indicator suggests that another eventual low is likely.

For Be[In]Crypto’s latest bitcoin (BTC) analysis, click here.

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