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Bitcoin price fell below its “fair value” for the fourth time in its history

In just a trading day, the Bitcoin’s price fell by 28.35% from $7,650 to $6,000, and then the price fell even more, to $4,679. A new low in 2020 and a value not seen since April 2019. The Bitcoin’s price fell below 1 in the Market Value to Realized Value (MVRV) which is considered a good period to buy Bitcoins. According to Coinmarketcap, Bitcoin’s current market capitalization is $98,351,344,124.



This picture show a bitcoin.

In the midst of the great crisis in international markets, caused by the spread of the new coronavirus in the world, the Bitcoin price fell for the fourth time in its history below the index of “fair value,” a definition that arises from the metric MVRV (Market Value to Realized Value) developed by analysts at Coin Metrics.

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The price of Bitcoin is in free fall  

According to the cryptanalysis firm itself, the Bitcoin’s price fell below 1 in the MVRV. This occurred after its market capitalization fell 46% in the last week. A value of the MVRV above 1 would represent for Bitcoin to remain above the fair value, as the market capitalization value would be above the effective capitalization value. Only at the end of 2011, 2014 and 2018, the value had been below that range.

The metric, developed by analysts Murad Mahmudov and David Puell, is based on the ratio between market capitalization, which arises from the multiplication of the number of coins in circulation and the current market price, and effective capitalization. A metric that establishes the value of unspent coins or those in “hodl,” according to the market price at the time of the last movement of the respective coins or when they were mined, in the case of unspent coins.

A MVRV below 1 scenario is a good time to buy Bitcoins

In its publication, Coin Metrics noted that scenarios in which the MVRV is below 1 “have been the best times to accumulate BTC at a relatively discounted price.” On the other hand, the company said that while market capitalization fell by nearly 50%, effective capitalization barely decreased by 3%. For analysts, this data indicates that “longer-term holders remain strong, and the recent price action is likely to be driven by new buyers.”

The MVRV index has been “overpriced” in the past. Previously, the indicator came to be above 3.7. According to its own creators, levels above that figure reflect an overvaluation of the cryptocurrency. The opposite of the current situation.

Market crash and Bitcoin below $6,000

It should be remembered that on Thursday, March 12th, the cryptocurrency market experienced a significant fall in which none of the main assets were spared.

In that context, the Bitcoin price first fell to around $6,000, and then even to $4,700, with a drop of 40% in 24 hours by that time. The price then rebounded and is currently at $5,461, in CoinMarketCap data at the time of writing.

BTC price situation

Previously, the BTC price had lost the $8,000 level in another red day, last Monday. With Thursday’s new low, there was even a brief collapse of the cryptocurrency exchange houses. In the medium term, so far this year bitcoin is in the red zone like all markets.

Only gold has been spared from the collapse caused by the widespread panic over the worldwide escalation of the coronavirus pandemic or COVID-19.


(Featured image by Dmitry Demidko via Unsplash)

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Sharon Harris is a feminist and a part-time nomad. She reports about businesses primarily involved in tech, CBD, and crypto. She started her career as a product manager at a Silicon Valley startup but now enjoys a new life as a personal finance geek and writer. Her primary aim is to provide readers with a new perspective on the overlapping world of finance and technology.