Recently analyzing on-chain data, I found that the MVRV Z-Score indicator is quite reliable and has been validated across four cycles. Simply put, it is used to determine Bitcoin's top and bottom regions.

First, understand what MVRV measures. It’s actually comparing two values: market value and realized value. Market value is straightforward—current BTC price multiplied by circulating supply—but this number can be influenced by external factors like news, FOMO, leverage, and so on. Realized value, on the other hand, reflects the true cost basis of all holders.

How is realized value calculated? It’s not just current price times circulating supply; instead, it looks at the last on-chain movement price of each Bitcoin. Every time BTC moves, it represents an economic decision—buying, selling, withdrawing, or depositing into exchanges. So, the last movement price is the true cost basis for that BTC holder. For example, a wallet that has been holding since 2020 will have a cost basis that stays at 2020 levels until someone moves it.

The purpose of the Z-Score is to measure how much the market value deviates from the realized value. When the deviation is too large, it indicates abnormality; when the deviation is small, it suggests the market is compressed.

How to interpret this indicator? When the MVRV Z-Score enters the red or pink zones, it means the market value far exceeds the realized value, indicating Bitcoin holders have made significant profits and are motivated to take profits. This is often a sign of market euphoria and a typical top signal. Conversely, when it enters the green zone, the market value is well below the realized value, long-term holders are at a loss, and it’s the time for accumulation.

Currently, BTC price is around 78.2K, with a circulating supply of about 78.2k. Using MVRV as a reference, it’s indeed a good indicator. For capturing the bottom in 2026, combining this indicator with other on-chain data should be quite effective. What do you all think?