Litecoin (LTC), the 12th largest cryptocurrency by market value, has shown a significant rally of almost 31% this year. However, an onchain metric called the MVRV Z-score suggests that Litecoin is currently trading at discounted prices, indicating that it may be undervalued relative to its fair value. This article delves into the onchain indicator’s insights and explores the potential implications for Litecoin’s future growth.
Understanding the MVRV Z-Score: A Measure of Undervaluation
The MVRV Z-score is a metric used to assess the gap between a cryptocurrency’s market value and its realized value. In the case of Litecoin, the Z-score has been negative, signaling that the cryptocurrency is undervalued compared to its fair value. Analytics firm Glassnode defines the realized value as the market cap adjusted to account for coins that have not been lost from circulation. The Z-score measures the difference in standard deviations between the market value and the realized value.
Historical Significance and Price Patterns
Litecoin’s Z-score has consistently remained negative since July of the previous year. This pattern is not new, as the indicator has previously dipped below zero before witnessing meteoric bull runs in the past. Negative Z-scores have historically indicated undervaluation and market bottoms, suggesting that Litecoin could be poised for upward movement in the future. However, it is crucial to consider external factors such as macroeconomic developments and global economic conditions that may influence the broader crypto market, including Litecoin.
Litecoin Growth: Is Litecoin Undervalued?
Presently, LTC is trading at $92, reflecting a year-to-date gain of nearly 31%. The cryptocurrency reached a one-month high of $95 earlier this week, indicating positive momentum. Based on historical trends and the current undervaluation suggested by the MVRV Z-score, there is a possibility that Litecoin’s path of least resistance may lean toward higher prices. Nevertheless, market conditions and external factors may still pose risks to the crypto market’s stability and growth.
