On-chain data shows that Shiba Inu investors are currently in deep losses, something that may help the cryptocurrency turn itself around.
Shiba Inu MVRV Z-Score Has Been Highly Negative Recently
According to data from the on-chain analytics firm Santiment, Shiba Inu is seeing tremendous FUD at the moment. The relevant indicator here is the “MVRV Z-Score,” which provides us with hints about whether a given cryptocurrency is overvalued or undervalued right now.
The indicator’s value is calculated by taking the difference between the asset’s market cap and realized cap and dividing it by the standard deviation of the market cap.
Here, the “realized cap” is a model that calculates the total value of a cryptocurrency by assuming that the real value of any coin in circulation is not the current spot price, but the price at which the coin was last transferred on the network.
The realized cap can be looked at as a measure of the total capital that the investors have put in (that is, the combined cost at which they bought their coins). Thus, whenever the MVRV Z-Score is positive, meaning that the market cap is greater than the realized cap, the investors as a whole are in profit.
The greater the MVRV Z-Score’s value becomes, the more the average holder gets into profit, and therefore, the more incentivized the investors become to cash in on their gains. Because of this reason, highly positive values can be an indication of the asset being overvalued.
On the other hand, the cryptocurrency can be considered to be undervalued in the opposite case where the realized cap is significantly greater than the market cap.
Now, here is a chart that shows the trend in the MVRV Z-Score for some of the top cryptocurrencies in the market over the past couple of years:
The MVRV Z-Score for the various top assets by market cap | Source: Santiment on Twitter
As displayed in the above graph, the Bitcoin MVRV Z-Score has been notably positive recently thanks to the strong upwards push that the number one asset in the sector has observed in this period.
While the current values aren’t too highly positive, they are still positive to a degree that the chances of a correction taking place due to investors participating in profit-taking may have increased a bit.
Many of the large altcoins in the market, however, have observed negative MVRV Z-Scores recently. The indicator’s value is slightly inside the red territory for the likes of Dogecoin (DOGE), Polygon (MATIC), and Cardano (ADA), implying that the average investor is underwater, although not by too much.
Shiba Inu investors, though, seem to be carrying a high amount of losses as the meme coin’s price has been struggling for quite a while now. The MVRV Z-Score of SHIB is currently the most negative out of the coins in this list.
Naturally, such values of the metric would suggest that Shiba Inu is quite underpriced right now. It now remains to be seen whether the asset being undervalued would translate to its price and if a rebound would take place in the near future.
At the time of writing, Shiba Inu is trading around $0.0000077, up 1% in the last week
Looks like the asset has been consolidating recently | Source: SHIBUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, Santiment.net