The 1-Year MVRV Z-Score Turns Negative: A Precursor to Bear Market Entry or a Buying Opportunity?

The Bitcoin 1-Year MVRV Z-Score has turned negative, currently hovering around 1.43, sparking debates among investors about whether this signals the onset of a bear market or a strategic entry point for long-term accumulation. This metric, which compares Bitcoin's market value to its realized value (adjusted for volatility), has historically served as a critical barometer for market cycles. A Z-Score below 1.5 often indicates oversold conditions, while levels above 2.5 suggest overbought territory. The current reading, though elevated from its 2025 low, remains in a historically significant range that has preceded resurgent bull phases in prior cycles.

Understanding the Negative Z-Score: Sentiment and Structural Dynamics

The MVRV Z-Score's recent dip to 1.43 follows a 30% correction in Bitcoin's price from a peak of $100,000 to $75,000. While this drop initially raised alarm bells, historical context provides nuance. In 2017 and 2021, similar Z-Score levels (1.43) marked local bottoms rather than cycle terminations. These pullbacks were followed by renewed upward momentum, suggesting the current correction aligns with a healthy bull market dynamic.

The negative Z-Score reflects widespread unrealized losses among short-term holders—investors who acquired Bitcoin within the last 155 days. These holders currently have an average cost basis of $88,400, while Bitcoin's spot price trades at $94,398. This means the market is still within a bull-phase range, with short-term holders holding modest profits. However, if Bitcoin's price were to fall below $88,400, it could trigger panic selling as these holders face real losses.

Unrealized Loss Distribution: A Test of Resilience

As of Q3 2025, between 2.0 and 3.5 million Bitcoin units are held underwater, representing 4.3% of the total market capitalization. While this is a notable figure, it pales in comparison to historical bear markets (e.g., 10% in 2019–2022). The relatively low proportion of unrealized losses suggests the market is less stressed than in previous cycles, likely due to increased institutional participation and ETF-driven demand.

The Relative Unrealized Loss metric, which measures the proportion of unrealized losses relative to total market cap, remains at 4.3%. This is a far cry from the 10% peaks seen during the 2022 bear market, indicating that the current correction is more akin to a mid-cycle consolidation than a full-blown bearish collapse.

On-Chain Signals: Accumulation or Capitulation?

The Value Days Destroyed (VDD) Multiple provides critical insight into market behavior. Currently in the “green zone,” VDD levels align with accumulation phases observed in late bear markets or early bull recoveries. This suggests that long-term holders are increasing their positions at lower prices, a bullish sign for the cycle's continuation.

Bitcoin Cycle Capital Flows further reinforce this narrative. After a surge in activity from short-term (<1 month) retail investors near the $106,000 peak, capital flows have shifted to the 1–2 year holding cohort. This group, often representing macro-savvy investors, has been steadily accumulating Bitcoin since the price pullback, mirroring patterns from 2020 and 2021 that preceded bull market surges.

Macro Risks and the Path Forward

While on-chain metrics paint a cautiously optimistic picture, macroeconomic factors remain a wildcard. Bitcoin's correlation with the S&P 500 (currently at 0.82) means global equity volatility could cap near-term gains. A potential global recession or tightening monetary policy could delay the resumption of the bull trend, even if on-chain fundamentals remain robust.

Investment Implications: Strategic Entry or Risk Mitigation?

For long-term investors, the current Z-Score of 1.43 represents a historically attractive entry point. The combination of low VDD activity, capital inflows from experienced holders, and a relatively low proportion of unrealized losses suggests the market is in a consolidation phase rather than a bearish downturn. However, prudence is warranted.

1. Position Sizing: Allocate capital to Bitcoin only after accounting for macro risks. A diversified portfolio with exposure to equities, gold, and cash can hedge against a potential equity market selloff.
2. Stop-Loss Levels: Monitor the $88,400 threshold. A sustained break below this level could trigger a wave of short-term selling, warranting a reassessment of risk exposure.
3. Time Horizon: Investors with a 12–18 month time horizon should consider accumulating Bitcoin at current levels, given the historical precedent for Z-Score-driven rebounds.

Conclusion: A Cycle in Motion

The 1-Year MVRV Z-Score's negative reading is not a death knell for the bull market but a signal of cyclical recalibration. While short-term volatility is inevitable, the on-chain data—particularly the shift to accumulation by long-term holders—suggests the market is setting up for a resumption of the upward trend. Investors who can navigate macroeconomic uncertainties and remain disciplined in their risk management may find this correction a compelling opportunity to position for the next leg of the bull cycle.