In the dynamic and often unpredictable world of blockchain analytics, Santiment, a leading analytics firm, has presented compelling insights which indicate that over 85% of alternate currencies, or altcoins as they are popularly referred to, are currently dormant within the prognosis of a historical “opportunity zone.”
To understand this prediction and gauge its significance, one must first fathom the relevance and nature of calculating the Market Value to Realized Value (MVRV), a recognized on-chain indicator. The MVRV ratio delineates an intricate comparison between the market cap of Bitcoin against its realized cap. Essentially, the market cap is the total valuation of the circulating supply of an asset calculated on the basis of its current spot price.
On the contrary, the realized cap is derived from an on-chain capitalization model that ascertains the value of an asset based on the notion that the “true” value of any coin is the last price at which it was transferred on the blockchain. This is logical, considering the last transaction of any coin would likely indicate the most recent change of hands and thus the price at that time would be its current cost basis. Piecing together the cost basis of every token in the circulating supply provides the aggregate realized cap.
In essence, the MVRV model can be visualized as a representation of the total sum of capital that investors have invested in a particular asset, with the market cap measuring the worth currently held by the owners. Since the MVRV ratio juxtaposes these two models, its value can reflect whether Bitcoin investors are holding more or less than their initial collective investment.
Based on historical trends, it has been observed that during high-profit periods, a tendency for market tops to form is very probable. This is attributed to the heightened risk of investors cashing in on their profits. Conversely, sustained losses tend to give rise to bottom formations as selling pressure begins to drain out of the market.
Santiment, leveraging these principles, has developed an “opportunity” and “danger” zone model for altcoins. Under this model, when the MVRV divergence for a particular asset over a set timeframe is more than 1, it designates that the asset has entered the bullish opportunity zone. If it drops below -1, however, it is within the bearish danger zone.
Current analysis indicates much of the altcoin market is residing in the ‘opportunity zone’. As Santiment explains, “Over 85% of assets we track are in a historic opportunity zone when calculating the market value to realized value (MVRV) of wallets’ collective returns over 1-month, 3-month, and 6-month cycles.”
This revelation, if we adhere to the model, suggests that a prime time to invest in altcoins could be just around the corner.
Ethereum, the largest of the altcoins, further supports this claim with a reported 3% increase over the recent week, taking its price to a sturdy $3,150.
Echoing this optimistic trend, it appears that asset prices have seen a notable boost in recent days, thereby shedding a hopeful light on the future of altcoin investments. However, as always, these are still predictions and the world of cryptocurrency is known for its unpredictability.
