Bitcoin has witnessed a remarkable performance this year, surging by 120% and outperforming assets like the Nasdaq 100 and the S&P 500 indices. However, it has pulled back to $97,000 from its all-time high of $108,427 following the Federal Reserve’s indication of just two interest rate cuts in 2025.
The recent pullback affected investors, as seen from spot ETF flows. SoSoValue reported net outflows of $276 million on Friday, a day after losing $680 million in assets, suggesting some investors thought Bitcoin might have peaked.
Nevertheless, the Market Value to Realized Value (MVRV) indicator implies that Bitcoin’s price remains undervalued even after reaching a record high last week. CoinGlass data shows the MVRV-Z score has dropped to 2.84 from last week’s high of 3.3. Historically, an MVRV-Z score below 3.7 indicates an asset is undervalued. The MVRV-Z score, calculated by subtracting the realized market capitalization from the circulation market value and dividing by the standard deviation, is a crucial metric for assessing a coin’s value. Bitcoin had an MVRV score of 3.03 in the March correction this year and 7 in the January 2021 correction, indicating the potential for a strong recovery in the coming weeks. As per a recent BTC forecast, the cup and handle pattern points to a rally to $122,000 in this bullish cycle.
Bitcoin also boasts strong fundamentals. The number of Bitcoins in circulation has dropped to a multi-year low of 2.24 million, down from over 2.72 million coins in exchanges in September this year. This shows more investors are opting to buy and store Bitcoins in self-custody wallets, including those accumulating ETFs, which now hold over $109 billion in assets. Companies such as Marathon Digital and MicroStrategy have continued accumulating Bitcoins this year, with MicroStrategy possessing over 439,000 coins.
Another potential catalyst is the growth of the stablecoin market cap, which has risen to nearly $210 billion from $122 billion a year ago. An increase in stablecoin value typically signals growing investor interest in cryptocurrencies. Additionally, Bitcoin’s annual inflation rate has continued to decline, reaching 1.12% from almost 12% in 2015, due to halving events and the rising mining difficulty rate.
In conclusion, while further Bitcoin pullbacks are possible, its favorable MVRV score and strong fundamentals suggest it will likely move higher in the long term.
Related topics:
Bitcoin Price Retreats After Rally, Crypto Market in Flux
Bitcoin Price Eyes $90K to $100K as $9.4B in BTC Options Set to Expire
