The MVRV Z-Score indicator turns out to be in the area of historical significance, which in previous cycles was associated with the inevitable price corrections of bitcoin (BTC).

If the current bitcoin cycle repeats previous trends, the price of the leading cryptocurrency may decrease by 47%, which will lead to a retest of the $32,000 level.

MVRV Z-Score warns of a possible correction

The MVRV Z-Score indicator helps to determine whether bitcoin is overvalued or undervalued compared to its "fair value". It usually moves in three ranges, sometimes breaking out of them in extreme bull or bear market conditions:

The green zone between 0 and -0.5 is a fair value.
The zone between 0 and 7 is a neutral fair value range.
The red zone between 7 and 9 is a reassessment.
The graph shows that the MVRV Z-Score reached level 2 for the first time in this cycle. In previous cycles, this signaled an upcoming correction in the BTC price, after which the asset formed a higher minimum and continued to grow.

If the same situation repeats this time, the next 6 months may become a period of accumulation in the bitcoin market, as well as an opportunity for the growth of other cryptocurrencies and the beginning of the altcoin season.

The achievement of the MVRV Z-Score of this important zone was also noted by the famous analyst. He, however, views this area as a deviation, assuming that BTC is not overheated yet.

Testing the $32,000 BTC zone

Now it is possible to evaluate historical corrections and determine the level of support by which the BTC price may decrease. In 2012, the drawdown was 59%, in 2016 - 38%, and in 2020 - 53%. Thus, the average drawdown is 47%.

If you apply this correction to the current chart, interesting technical correspondences become visible. A 47% decrease in BTC from the current level will lead to support around $32,000 - this almost coincides with the Fibonacci retracement level of 0.618 of the entire upward movement from the lows of the current cycle. In addition, the $32,000 level has repeatedly demonstrated itself as a support and resistance level since 2021.

If the long-awaited correction in the bitcoin market takes place in the next 6 months, the $32,000 level will become an attractive buying area. This is indicated by both technical compliance and MVRV Z-Score.