Bitcoin Undervalued According To Metrics! Is It A Good Time To Invest?

As Bitcoin goes through a new correction phase, undervaluation signals are accumulating, offering a unique opportunity for savvy investors. Although the leading cryptocurrency has recently flirted with its all-time highs, several key indicators, such as the MVRV Z-score, show significant declines, highlighting a disconnect between the current market value and its fair valuation. This setup, coupled with an impressive 800% increase in open interest on perpetual futures contracts, suggests considerable bullish 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 decreased. The MVRV Z-score, an indicator that assesses the relative position of market value to realized value, shows significant drops: -116% over three months, -94% over two years, and -107% over four years. This decline in ratios indicates that Bitcoin is currently undervalued, providing an ideal entry window for investors. Additionally, the open interest (OI) in perpetual futures contracts has increased by 800% over the past four years, a sign that the market is expecting a significant move.

In addition to these undervaluation signals, the correction over the past six months has “eliminated excess optimism” that had inflated the market. This results in an ideal setup for a bullish rebound. Another crucial point lies in the historical correlation between Bitcoin’s price and global liquidity. In this perspective, Bitcoin recorded a 0.94 correlation with global liquidity between 2013 and 2024, indicating a direct relationship between the increase in global money supply and BTC valuation.

Political Uncertainty and Q4 Predictions

Despite these promising signals, the fourth quarter of 2024 also has some dark areas, mainly due to the U.S. presidential election. Indeed, election years in the United States have historically been more volatile for Bitcoin. Such volatility primarily stems from uncertainties about election outcomes and their potential impact on financial markets, prompting investors to adopt a more cautious stance.

However, the last months of the year could be more favorable for Bitcoin. Once the election results are known, the markets should regain relative stability, allowing investors to refocus on economic fundamentals. Additionally, Bitcoin could end the year strongly after recording a “historically green September” with a 7.29% increase. This could create a favorable momentum as 2025 approaches, a year that could be marked by the next Bitcoin halving.

As Bitcoin seems poised for a potentially explosive fourth quarter, many external factors, such as global liquidity and election uncertainty, continue to weigh on the market. While technical indicators point to an upcoming rise, the results of the U.S. elections and fluctuations in the global money supply will be decisive for the coming months.