According to these indicators, supply chain analytics firm Santiment revealed that Shiba Inu has been recently underbought while Bitcoin is overbought.
MVRV’s Z-Score suggests that the Shiba Inu has been underrated recently
In New post in X, Santiment discussed how some of the top cryptocurrencies currently look like on their MVRV Z-Score. “Market Value to Realized Value” (MVRV) refers to a popular on-chain metric that tracks the ratio between market capitalization and realized capitalization for any given asset.
The limit implemented in this case is a capitalization model that calculates the total value of a cryptocurrency by assuming that the “real” value of any token in circulation is equal to the price at which the coin was last traded on the blockchain.
Since the previous transaction of any coin was the last time it changed hands, the price at that time would be its base cost. Therefore, the realized cap is the sum of the base cost of all tokens in circulation.
In other words, this model measures the total capital that investors used to purchase the supply of a given asset. Market capitalization, on the other hand, tracks the value these investors hold. Therefore, MVRV, which compares these two indicators, tells us about the profit/loss situation of investors as a whole.
In the context of the current topic, the actually intriguing metric is the “MVRV Z-score.” This ratio takes the difference between market capitalization and realized capitalization and divides it by the standard deviation of market capitalization over the history of the asset.
Here is a chart provided by Santiment that shows the trend of this indicator for various coins in the sector:
Based on the MVRV Z-Score, Santiment has defined three zones that refer to how far away from fair value an asset is. The chart shows that Shiba Inu (SHIB) and Uniswap (UNI) recently had a ratio of -1.55 and -1.96, which puts these assets in the “underbought” zone.
At these MVRV Z-Score values, the market capitalization is much lower than the realized capitalization, which means that investors are widely lost. Generally speaking, profit holders are a more likely source of selling pressure in the market, so when there are few of them, price corrections may become less likely.
Therefore, an asset is considered undervalued when the indicator falls below -1. Due to similar reasoning, values above 1 correlate with the coin being overvalued.
Bitcoin (BTC), Ethereum (ETH), and Toncoin (TON) have recently found themselves in the latter territory, suggesting that their prices may be facing bear action. On the other hand, Shiba Inu and Uniswap could be better prepared for price increases.
SHIB price
At the time of writing, the Shiba Inu price is around $0.0000171, up 2% over the past week.
Featured image from Shutterstock.com, Santiment.net, chart from TradingView.com