As Bitcoin goes through another correction phase, undervaluation signals are accumulating, providing a unique opportunity for savvy investors. Although the flagship cryptocurrency has recently neared all-time highs, several key indicators, such as the MVRV Z-score, are showing significant declines, highlighting a disconnect between the current market value and its fair valuation. This setup, coupled with an impressive 800% rise in open interest on perpetual futures, suggests significant upside potential as the end of the year approaches.
Bitcoin undervaluation indicators
Bitcoin's latest correction should not worry investors. Indeed, Bitcoin is close to its all-time highs, but its valuation metrics have all declined. The MVRV Z-score, an indicator that assesses the relative position of market value compared to realized value, shows significant declines: -116% over three months, -94% over two years, and -107% over four years. This drop in ratios shows that Bitcoin is currently undervalued, providing an ideal entry window for investors. Additionally, the open interest (OI) of perpetual futures has increased by 800% over the past four years, a sign that the market is expecting a notable move.
In addition to these signals of undervaluation, the correction of the last six months has “eliminated the excess optimism” which had inflated the market. This results in an ideal configuration for a bullish rebound. Another key point lies in the historical correlation between the price of Bitcoin and overall liquidity. In this perspective, Bitcoin recorded a correlation of 0.94 with global liquidity between 2013 and 2024, indicating a direct relationship between the increase in global money supply and the valuation of BTC.
Political uncertainty and forecasts for the final quarter
Despite these promising signals, the fourth quarter of 2024 also contains gray areas, notably due to the American presidential election. Indeed, election years in the United States have historically been more volatile for Bitcoin. Such volatility arises mainly from uncertainties about the electoral results and their potential impact on financial markets, which pushes investors to adopt a more cautious position.
However, the last months of the year could be more favorable for Bitcoin. Once the election results are known, markets should return to relative stability, allowing investors to once again focus on economic fundamentals. Additionally, Bitcoin could close out the year strong after recording a “historically green September” with a rise of 7.29%. This could create favorable dynamics as we approach 2025, a year that could be marked by the next Bitcoin halving.
While Bitcoin appears to be in a strong position for a potentially explosive fourth quarter, many external factors, such as overall liquidity and election uncertainty, continue to weigh on the market. If technical indicators point to a future rise, the results of the US elections and fluctuations in the global money supply will be decisive for the months to come.
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