Has the Signal That Failed in Previous Bitcoin Bull Runs Flared Up Again? A Warning Is in Order

CryptoQuant, a cryptocurrency analysis platform, stated that Bitcoin is approaching a critical level on its MVRV Z-Score indicator, but the current picture does not yet confirm the start of a new bull market. According to the analysis, the MVRV Z-Score is approaching its 365-day moving average, which has stood out as a significant regime change level in past market cycles.

CryptoQuant added that in the past, a sustained breakout above the 365-day moving average on the MVRV Z-Score signaled a market transition from a recovery phase to an expansion phase. It was noted that the breakout in 2015-2016 preceded the 2017 bull market, the 2020 move preceded the 2020-2021 rise, and the 2023 recovery coincided with the final expansion period.

Bitcoin’s MVRV Z-Score Remains Below Average

However, the indicator is still below the 365-day moving average. According to CryptoQuant, if Bitcoin breaks above this level and maintains its position, it could indicate a resurgence of unrealized profits across the network and the start of a new expansion regime. A rejection from this level, on the other hand, could mean that overall market profitability is not yet strong enough to support a broader bull run.

The analysis also highlighted a key point that distinguishes the current market cycle from previous lows. In past major cycle lows, the MVRV Z-Score fell below zero, reaching a low valuation zone. This did not happen in the recent pullback. CryptoQuant noted that this could mean Bitcoin is experiencing a structurally shallower correction, or that a capitulation on the scale seen in previous macro lows may not yet be complete.

On the other hand, it was noted that the MVRV Z-Score formed lower peaks in each cycle. According to CryptoQuant, this trend indicates that even if the Bitcoin price continues to reach higher peaks, the excesses experienced by the market in terms of valuation are becoming more limited over time.

CryptoQuant’s risk assessment states that for a bullish scenario, the MVRV Z-Score needs to regain and remain above the 365-day moving average. A rejection from this level would indicate the market remains in a “repair” regime, while a return of the indicator towards zero could reinforce the view that the current correction process is not yet complete.

*This is not investment advice.