October 12, 2021
On September 23, 2018, at the Baltic Honeybudder Conference in Riga, Latvia, Nick Carter Presented the concept of available price (originally “available cap”, but both terms have since been used interchangeably) which he co-created Antoine Le Calvez. Using the Bitcoin timechain, which contains the universal record of all bitcoin transactions, the available value shows the total bitcoin total USD (USD) value of those coins that were moved on-chain. Figure 1 shows this available price (blue) along with the total market value of Bitcoin (black), which is the total market value of all existing Bitcoins at any given time.
Under the assumption that most on-chain transactions represent the actual transfer of value (e.g., buying or selling bitcoin against fiat money or using it to purchase goods or services), the available price represents the collective cost of each bitcoin. . As can be seen in Figure 1, the basis of this combined cost seems to be appropriate for estimating lower prices during bear market conditions, as apparently most bitcoin holders do not realize the loss of a property that they think is the long-term opposite.
Market-Price-to-Available-Price (MVRV) Z-Score
This new concept of available quality was a breakthrough in the emerging field of on-chain analysis. October 2, 2018, David Puel And Murad Mahmudov Repeat the work of Carter and Calvez by introducing a market-price-to-available-price (MVRV) ratio. The MVRV ratio is calculated by the actual value (RV) of the total bitcoin market value (MV). Therefore, metric holders represent an increase in the amount that exceeds the current Bitcoin market valuation (value> 1) or actually the discount (value <1) compared to the aggregate price.
One week later, on October 9, 2018, Surprise and wonder MVRV has been further integrated on the MVRV ratio by creating a metric called Z-score. The MVRV z-score first calculates the difference between the market value of the total bitcoin and its available value, and then divides the market valuation by the value deviation-a common statistical method known as “standardization.” The MVRV Z-score, therefore, represents the value deviations that each bitcoin market valuation increases or decreases against its available price. Although the mechanism behind this pendulum may be difficult to explain to some, the visualization of this metric actually makes it much easier to compare Bitcoin to the previous relative Bitcoin market.
Figure 2 shows the MVRV z-score over time. The colored horizontal lines represent the MVRV z-scores 0 (blue), 2 (green), 4 (yellow), 6 (orange), 8 (red) and 10 (brown).
Based on the same method used to create the Bitcoin Price Temperature (BPT) band on December 15, 2020, this article repeats the MVRV Z-score by looking at the price level of the six-color MVRV Z-score that was highlighted in Figure 3 as a regular ( Logarithmic) Figure 2 of the bitcoin price chart.
Since the MVRV z-score divides the difference between the market price of Bitcoin and the available price by (all-time) market price value deviation, the metric is sensitive to changes in Bitcoin price volatility. At a time when the market value of Bitcoin rises rapidly, its all-time value deviation also increases, causing the displayed bands to become opelo, thus requiring higher quality to reach the MVRV Z-score level and vice versa during market downturns. This dynamic is better visible in Figure 4, which zooms in on the data for the last five years.
The metrics and visualizations that were introduced in this article are free to be copied, used, and expanded by others. At the time of writing, no web-based version of the metric is yet available, but no more code Available at GitHub.
Disclaimer: This article was written for educational and entertainment purposes only and should not be taken as investment advice.
This is a guest post by Dilution-proof. Opinions are entirely their own and BTC, Inc. Bitcoin Magazine.