Altcoins Across The Sector Are Underbought: Santiment
On-chain data from Santiment suggests that altcoins across the entire cryptocurrency sector may be underbought right now.
MVRV Of The Various Altcoins Suggests Underpriced Conditions
According to data from the on-chain analytics firm Santiment, cryptocurrency assets have become underbought as traders are now capitulating following a failed price rebound.
The relevant indicator here is the “MVRV” (Market Value to Realized Value), which measures the ratio between the market cap and the realized cap of a given cryptocurrency.
Here, the “realized cap” refers to a capitalization model for BTC where the value of any coin in the circulating supply is assumed to be not the current spot price, but the price at which it was last transacted on the blockchain.
This model aims to calculate a sort of “fair value” for the asset. As the MVRV compares the market cap (that is, the current price) with the real value of the cryptocurrency, it can provide hints about whether the price is currently overinflated or not.
Santiment has defined an “opportunity” zone and a “danger” zone for this indicator. As their names already imply, the asset in question becomes underpriced when the metric is in the former area, while it becomes overpriced in the latter one.
Here is a chart that shows the trend in the divergence of the MVRV from these zones for the various altcoins in the sector:
The value of the metric seems to be above zero for most of the market | Source: Santiment on Twitter
Whenever the MVRV divergence has a value of 1 or more, the indicator is said to be inside the opportunity zone. Similarly, the danger area occurs below a value of -1.
While these are the two extreme zones, the metric being firmly inside either the positive or the negative zone (but not hitting either of these thresholds), still signals slight underbought or overpriced conditions, respectively.
This means that the chances of bullish rebounds can become greater whenever the indicator enters positive territory. From the chart, it’s visible that the vast majority of the coins in the digital asset sector are at least inside the positive territory at the moment.
This would imply that these coins may have become underpriced recently. Some of the altcoins are also outright inside the opportunity zone, suggesting that they may be offering low-risk buying opportunities right now.
There are a few cryptocurrencies, however, that are inside the negative zone, with a couple of them even being inside dangerous territory. Such alts have more chances of registering a decline in the near future.
Recently, the various altcoins have attempted to amass together a rebound, but so far, they have only seen failure. However, now that the prices have started to become undervalued, perhaps a break may be found soon.
At the time of writing, Bitcoin is trading around $26,400, down 1% in the last week.
Looks like BTC has once again plunged below $27,000 | Source: BTCUSD on TradingView
Featured image from Art Rachen on Unsplash.com, charts from TradingView.com, Santiment.net