Bitcoin on chain analysis: RC catches up with MC, a characteristic of a bull market

Bitcoin Magazine will look at Bitcoin’s on-chain metrics (BTC), more specifically the MVRV Z-Score, then Market Capitalization (MC) and Realized Cap (RC) to determine the direction of the coin.

MVRV Z-Score

MVRV is the ratio between the market capitalization and the actual capitalization of a coin. Put simply, an MVRV of 3 means that the market capitalization is three times the actual capitalization. It is used to determine a “fair” price for BTC because when the market value is well above its real value, it means that BTC is overvalued.

The MVRV Z-Score is a variation of the MVRV On-Chain Indicator. It uses the standard deviation to scale the specified scale. This is done to determine the difference between market capitalization and reality as standard deviations.

Zone 7-9 (highlighted in red) is considered an overbought zone. Above this range (black circle) all four previous market cycle highs are valid.

However, the peak in 2021 has a value of 7.63 (black arrow). At this point in time, the market was significantly less overbought than at the top of previous market cycles.

Interestingly, the MVRV Z-Score was only 3.33 despite the BTC’s all-time high again on November 10th.

This means that the real value will keep up with the market value of BTC.

The source: Glass knot

MC and RC

BTC market capitalization (MC) is calculated by multiplying the market price of BTC by the total number of coins mined. Realized Cap (RC) also uses a similar multiplication. Instead of the market price, however, the most recent Unspent Transaction Output (UTXO) price is used.

Hence, it can be seen as a more accurate representation of the current value of BTC as it reduces the value of coins that have not moved for a long period of time.

RC often rises during bull markets as old coins are moved to take profits. It falls during a bear market when investors reduce their losses.

RC has been growing rapidly since the beginning of March. After a pause from May to July when BTC price corrected, RC resumed its uptrend.

As mentioned above, this is a sign of a bull market.

The source: Glass knot

Compared to the market capitalization (black), the realized profit (blue) is smoother. Since BTC’s uptrend began in July, the realized cap has not fallen at all, although market capitalization has done so in the short term.

This shows that during these short-term pullbacks, investors do not sell at a loss but take profits, as is common in bull markets.

The source: Glass knot

You can see the BTC price Here.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

SN_Nour

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