Bitcoin's MVRV Ratio: A Convincing Case for Undervaluation and the Next Bull Cycle

The Bitcoin Market Value to Realized Value (MVRV) ratio has long served as a critical on-chain metric for gauging whether the cryptocurrency is overvalued or undervalued relative to the historical cost basis of its holders. As of October 2025, the MVRV ratio stands at 2.64, significantly lower than the peaks observed during the 2017 and 2021 bull cycles. This divergence suggests that Bitcoin remains in a structurally undervalued phase, offering compelling entry points for investors ahead of the next major price rally.

Historical Context and the MVRV Ratio's Predictive Power

The MVRV ratio is calculated by dividing Bitcoin's market capitalization by its realized capitalization-the sum of the purchase prices of all circulating Bitcoin at the time they last moved. Historically, values above 3.7 have signaled overvaluation and potential market tops, while ratios below 1.0 indicate undervaluation and capitulation. During the 2017 and 2021 cycles, the ratio reached overvaluation thresholds before sharp corrections, but the current level of 2.64 suggests there is still substantial room for appreciation before reaching similar extremes, as shown in Mapping Bitcoin's bull cycle.

Short-term holders (STHs), who typically hold Bitcoin for less than 155 days, historically see their MVRV ratio peak at 1.33 during local tops (the blockchainreporter analysis cited above). In contrast, long-term holders (LTHs)-those holding for over 155 days-have historically seen their MVRV ratios surge to as high as 12 during major peaks (the blockchainreporter article documents this as well). The current MVRV ratio for LTHs is 3.11, according to The Financial Analyst, far below historical overvaluation levels, reinforcing the argument that Bitcoin's long-term holders are still in a growth phase.

The MVRV Z-Score: A Deeper Look at Investor Sentiment

The MVRV Z-Score, a normalized metric that measures the deviation of market value from realized value, provides further insight into investor psychology. As of October 2025, the Z-Score is at 2.34, placing Bitcoin in a neutral zone. This is far below the overvaluation thresholds of 7 seen during the 2017 and 2021 cycles, which preceded major market tops. Conversely, Z-Scores near or below zero have historically marked undervaluation and accumulation opportunities, as seen during historical market bottoms such as 2015, 2018–2019, and March 2020.

The current Z-Score suggests that while market sentiment is cautiously optimistic (as reflected in a Fear and Greed Index reading of "greed"), it is not yet euphoric. This contrasts with the 2017 and 2021 cycles, where Z-Scores above 3.0 were followed by sharp corrections (nakamotonotes reported the 2.34 reading noted above). The absence of extreme overvaluation metrics indicates that Bitcoin's price is still anchored to its intrinsic value, rather than speculative fervor.

Market Psychology and the Path to the Next Bull Cycle

Bitcoin's MVRV metrics align with broader patterns of investor behavior. During undervaluation phases, capitulation and selling pressure often drive prices to multi-year lows, creating buying opportunities for long-term investors. The current MVRV ratio and Z-Score suggest that Bitcoin is in such a phase, with holders still accumulating at prices far below their historical cost basis. This dynamic is particularly evident among LTHs, whose continued participation in the market indicates confidence in Bitcoin's long-term trajectory (see The Financial Analyst's coverage cited above).

Historically, diminishing MVRV multiples in subsequent cycles (e.g., 4.35 in 2017, 3.7 in 2021, and 2.64 in 2025) suggest that each bull cycle is becoming more efficient, with less speculative excess required to drive prices higher (see Mapping Bitcoin's bull cycle). This could imply that the next bull cycle, potentially catalyzed by macroeconomic shifts or regulatory clarity, may see Bitcoin reach new all-time highs without the same level of overvaluation seen in prior cycles.

Conclusion: A Strategic Entry Point

Bitcoin's current MVRV ratio and Z-Score paint a clear picture: the asset remains undervalued relative to its historical cost basis, with strong fundamentals and growing institutional adoption providing a foundation for future growth. While market psychology is cautiously optimistic, it is far from euphoric, reducing the risk of an imminent correction. For investors, this represents a strategic opportunity to position for the next bull cycle, leveraging on-chain metrics to time entries with greater precision.

As the MVRV ratio continues to trend upward and the Z-Score approaches overvaluation thresholds, the focus should remain on disciplined accumulation and risk management. The next chapter in Bitcoin's market cycle may well be defined by a more mature and rational investor base-one that values fundamentals over speculation.