Analysis: The MVRV index indicates that BTC may strongly recover in the next few weeks

Although Bitcoin may further pull back, there are signs that its good MVRV score and strong fundamentals will help drive it higher in the long term. According to CoinGlass data, the Market Value to Realized Value (MVRV) indicator shows that even if BTC hit a record high last week, its price is still undervalued. Its MVRV-Z score has dropped from last week's high of 3.3 to 2.84. Historically, an MVRV-Z score below 3.7 indicates that the asset is undervalued.

Bitcoin's MVRV score was 3.03 during its major adjustment in March this year and was 7 during its previous major adjustment in January 2021. This suggests that this score indicates BTC could strongly recover in the coming weeks. In addition, BTC also has some strong fundamentals including circulating BTC quantity dropping to a multi-year low of 2.24 million coins as of September this year compared with over 2.72 million coins on exchanges earlier this year indicating more investors are buying BTC and storing them in self-custodial wallets with some accumulating ETF shares.

Another potential catalyst for Bitcoin is stablecoin market value jumping from $122 billion a year ago to nearly $210 billion now while Bitcoin's annual inflation rate continues declining from nearly 12% peak in2015 down to current level at around1 .12%, due largely because of halving events and increased mining difficulty.

Note: The MVRV-Z Score is an important measure of token market value relative value calculated by subtracting realized value from circulating market cap then dividing by standard deviation.