Altcoins are underbought across the board: Sentiment

On-chain data from Sentiment shows that altcoins are currently overbought across the entire crypto space.

MVRV of various altcoins suggest a bearish position

According to data from on-chain analytics firm EmotionThe crypto asset has become underbought as traders are now capitulating after a failed price rally.

The relevant indicator here is “MVRV” (market value to realized value), which measures the ratio between a given cryptocurrency’s market cap and realized cap.

Here, the “realized cap” refers to a capitalization model for BTC where the value of any coin in the circulating supply is not considered the current spot price, but the price at which it was last transacted on the blockchain.

The purpose of this model is to calculate the “fair value” for the asset. As MVRV compares the market cap (i.e., the current price) with the actual value of the cryptocurrency, it can give an indication about whether the price is currently overpriced.

Sentiment has defined an “opportunity” zone and a “threat” zone for this indicator. As their names already suggest, when the metric is in the former area, the value of the property in question decreases, while it increases in the latter.

Here is a chart showing the trend in the deviation of MVRV from these zones for various altcoins in the zone:

The value of the metric seems to be above zero for most of the market | Source: Santiment on Twitter

The indicator is said to be inside the opportunity zone whenever the MVRV divergence has a value of 1 or more. Similarly, the danger zone is below a value of -1.

While these are two extreme zones, the metric is firmly inside either positive or negative territory (but not hitting either of these thresholds), yet indicates slight underbought or overbought conditions, respectively.

This means that whenever the indicator enters positive territory, there is a high probability of a bullish rebound. From the charts, it is visible that most of the coins in the digital asset sector are at least in the positive territory for the time being.

This would mean that these coins may have been undervalued recently. Some altcoins are also within the opportunity zone, suggesting that they may offer risk-on buying opportunities right now.

Although, there are some cryptocurrencies, which are inside the negative zone, some of them are also inside the dangerous zone. Such alts are more likely to register a decline in the near future.

Recently, various altcoins have attempted to put together a rally, but so far, they have only seen failure. However, now that the prices have started getting undervalued, a break may happen soon.

btc price

At the time of writing, bitcoin is trading around $26,400, down 1% over the past 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