If this support fails, Bitcoin could plummet to $80,100

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On-chain data shows that Bitcoin is currently retesting its critical support levels. If this level fails, then there is the next important line:

Bitcoin is currently trading the MVRV average for about a year

In its latest weekly report, on-chain analytics firm GlassNode discusses a Bitcoin pricing model based on the market value of the Market Value (MVRV) Z score.

The MVRV Z-score is an indicator that basically compares the market capitalization of BTC with the realization cap. The metrics differ from the typical MVRV ratio. This is because standard deviation tests are also applied to extract extremes from the data.

More formally, the indicator is calculated as follows:

The difference between the market capitalization and the realization cap, and the standard deviation of the market capitalization, i.e. the market capitalization – the realization cap) / the ratio of STD (market capitalization)

The “realized cap” here refers to the bitcoin that calculates the total valuation of an asset by assuming that the “true” value of the token in circulation equals the price that was last moved on the blockchain. It refers to the uppercase model.

You can assume that the last transaction in the token is the last price with a change of hand. Therefore, prices at the time can be considered as current cost-based. Therefore, the realized cap is the sum of the cost-based of all coins on the network.

In this context, the MVRV Z-score essentially tells us how the value held by investors (i.e. market capitalization) is compared to the capital they initially put in (realization cap).

Now, here is the chart for the Bitcoin price range band model based on this metric shared by the analytics companies in the report:

If this support fails, Bitcoin could plummet to ,100

As shown in the graph above, this model consists of three lines related to the standard deviation (SDS) of MVRV Z-scores over the year. The lines are the average, +1 SD, and -1 SD of the metrics.

Currently, the mid-price price range for the model is at around $96,300. This is the same level as BTC has returned as support during the recent market slump.

As the report explains,

At this point, prices find strong support close to average levels. If prices drop, -1σ could mark the key threshold for the Bulls’ next major defensive support line. Conversely, the +1σ level can act as a resistance as investors fall into meaningful, unrealized paper profits and try to realize the strength of the market.

-1 SD support level is currently $80,100, while the +1 SD resistance line is $118,000. It is currently unclear which of these average levels of retest will lead to Bitcoin.