Shiba Inu ‘Underbought,’ While Bitcoin ‘Overbought’ Recently: Santiment
July 01 2024 - 1:30PM
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According to this metric, the on-chain analytics firm Santiment has
revealed Shiba Inu has been underbought recently, while Bitcoin is
overbought. MVRV Z-Score Suggests Shiba Inu Has Been Undervalued
Recently In a new post on X, Santiment has discussed how some of
the top cryptocurrencies are looking like right now on their MVRV
Z-Score. The “Market Value to Realized Value” (MVRV) refers to a
popular on-chain indicator that keeps track of the ratio between
the market cap and realized cap for any given asset. The realized
cap here is a capitalization model that calculates the total
valuation of the cryptocurrency by assuming that the ‘real’ value
of any token in circulation is equal to the price at which said
coin was last transacted on the blockchain. Related Reading: Solana
(SOL) Surges 18%, But Watch Out For Crowd FOMO As the previous
transaction of any coin was the last time it changed hands, the
price at its time would denote its cost basis. Thus, the realized
cap is a sum of the cost basis of all tokens in the circulating
supply. Put another way, this model measures the total capital the
investors used to purchase the asset’s supply. The market cap, in
contrast, keeps track of the value these investors hold. As such,
the MVRV, which compares these two metrics, tells us about the
profit/loss situation of the investors as a whole. In the context
of the current topic, the actual metric of interest is the “MVRV
Z-score.” This indicator takes the difference between the market
cap and the realized cap and divides it by the standard deviation
of the market cap over the asset’s entire history. Now, here is the
chart shared by Santiment that shows the trend in this indicator
for various coins in the sector: Based on the MVRV Z-Score,
Santiment has defined three zones that relate to how far from its
fair value the asset is. The chart shows that Shiba Inu (SHIB) and
Uniswap (UNI) have had the indicator at -1.55 and -1.96 recently,
putting these assets inside the ‘underbought’ territory. At these
MVRV Z-Score values, the market cap is significantly lesser than
the realized cap, meaning investors are widely lost. Generally,
profit holders are a more likely source of selling pressure in the
market, so when there are few of them left, price corrections can
become less probable. Related Reading: Retail Losing Interest In
Bitcoin? Volume Plunges 30% This is why assets are considered
undervalued when the indicator drops below the -1 level for them.
Due to a similar reasoning, values above 1 correlate to the coin
being overvalued. Bitcoin (BTC), Ethereum (ETH), and Toncoin (TON)
have recently been inside this latter territory, suggesting that
their prices could be in danger of seeing bearish action. Shiba Inu
and Uniswap, on the other hand, could be better set up for a price
surge. SHIB Price At the time of writing, Shiba Inu is trading
around $0.0000171, up 2% over the past week. Featured image from
Shutterstock.com, Santiment.net, chart from TradingView.com
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