One-Upping Your Buy Low/Sell High Game With MVRV Z-Score

We've talked about our Sansheets model that averages MVRV's from different timeframes together to give an equal glimpse of how much of an opportunity or danger zone your favorite asset is. You can read all about it in our article here!

However, an overlooked metric that we've had on Sanbase is the MVRV Z-score. This metric shows the standard deviation of where its average MVRV's are, relative to normal resting averages.

Assuming you are a Sanbase PRO member, you can take a live look at how things look on our template, which shows both Bitcoin and several top altcoins in the negatives for a pretty extended period of time:

Uniswap and Shiba are both at the lowest levels among the top 10 assets we have MVRV-Z score data on. This suggests they would be at the lowest risk to buy, historically.

On the other hand, Binance Coin and Dogecoin are both in positive territory, meaning that buying or adding on to your positions here would be doing so at an increased risk vs. the usual opportunity to do so.

Let's also take a look at how Bitcoin's MVRV Z-score has looked for the past decade. Pretty clearly, it's rare for BTC to go into negative territory, historically:

The clear dips it did see in the negative territory were:

  • January 2015 - October 2015 (BTC +50% while MVRV-Z score was in the negative territory, BTC +49% in the next 2 months after negative territory ends)
  • November 2018 - March 2019 (BTC +8% while MVRV-Z score was in the negative territory, BTC +57% in the next 2 months after negative territory ends)
  • June 2022 - Present Day (???)

Make of this what you will, as this is the only the third sustained occurence of Bitcoin's MVRV Z-score being in the negatives over the past decade. This cross started in June, and the one in 2015 lasted 9 months (we're on the 6th months now here in 2022).

This chart can also of course be used to catch price tops, and it's pretty clear there have been four major ones where the MVRV-Z score jumps above 6.0. When that happens, understand that prices have tended to retrace pretty hard, historically.

Do you think this kind of analysis could complement your trading strategy? How do you think it could potentially improve? Let us know what you think!


Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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