Source: Glassnode; Compiled by: White Water, Golden Finance

Bitcoin has entered a correction phase, trading 11% down from its all-time high of $108,000, but still above key support levels , maintaining a constructive market structure.

Z-Score analysis shows that cyclical highs typically coincide with various indicators ranging from 1.5 to 2.0σ above average, providing a framework to help navigate bullish market phases.

Bitcoin’s current price is approximately 10% above short-term holders’ cost basis of $884,000, underscoring the downside risks if momentum stalls and prices fall below this level.

Unrealized losses were concentrated among short-term holders, with 2.0-3.5 million BTC being held, reflecting moderate market stress.

Relative unrealized losses peaked at 4.3% in Q3 2024, significantly lower than in previous cycles driven by external shocks, underscoring a more spot-oriented and patient market.

The realized price reflects the average price of all Bitcoins last traded on-chain and therefore represents the total cost base of the market. The MVRV ratio is the ratio between the spot price and the realized price, and it measures the size of the average unrealized profit. Values ​​above 1 represent average unrealized profits, and values ​​below 1 represent unrealized losses.

The MVRV ratio is currently trading at 1.32, indicating that the average unit of BTC holds 32% of unrealized profits. This structure is similar to the post-ATH structure in mid-April 2024, suggesting that overall sentiment remains positive despite the market correction.

Over the years, the Bitcoin market has matured, and at the same time, MVRV peaks have cyclically decayed near cyclical tops. This reflects an overall weakening of speculative extremes as asset size grows.

The MVRV highs have been gradually lower in each market cycle, indicating that the average unrealized profit multiple is decreasing:

2011: 8.07x

2014 : 6.00 times

2018: 4.81 times

2021: 3.98 times

2024: 2.78 times (to date)

This decline suggests a gradual reduction in volatility and speculative intensity as market size and liquidity grow. This also suggests that while Bitcoin remains cyclical, each spike has become relatively less exaggerated, consistent with a more mature and efficient market structure.

To explain the decrease in MVRV peak value over successive cycles, we can use statistical methods to normalize its oscillation range. A widely accepted method in financial time series analysis is the Z-score, which is calculated as follows：

Z-Score = (X - μ) / σ

X is the observation value,

μ is The mean value,

σ is the standard deviation.

When calculating the Z-score, we can use the entire historical data set for a cumulative view, or we can adopt a shorter rolling window to better capture the dynamic nature of financial cycles and tapering peaks in MVRV .

Using the entire historical data for the MVRV Z-score conversion can lead to some skewed results, as earlier cycles with higher peaks distort the mean and standard deviation so that they do not reflect current market conditions.

Therefore, to account for these effects, we optimize the rolling window by shortening its length and using more recent market history as a benchmark.

The chart below compares the cumulative Z-score to a version calculated using a 4-year rolling window. Despite our attempts to accommodate the dynamic nature of market cycles, the results remain almost the same and the MVRV peak decay issue remains unresolved.

Going to the 2-year rolling window for Z-score calculations (blue), the peak observed in the most recent cycle ATH in March 2024 is very much in the range of the peaks in the previous two cycles near.

In this case, we have now adjusted for the decrease in peak MVRV. However, the 2-year rolling window Z-score does not mark significant market highs in Q4 2015, Q3 2019, and Q2 2023, suggesting there may be potential for further optimization.

Finally, we applied a 1-year rolling window in the Z-score calculation, resulting in a more precise and promising transformation. This approach can identify mid- and late-stage peaks on a similar scale, providing a clearer representation of near-term market dynamics.

This 1-year MVRV Z-score suggests that cyclical bull markets continue to reach local and global peaks in the 2σ range, with investor profitability improving significantly over a relatively short period of time. During the bear market phase, local and global lows are captured when MVRV trades -1.5σ away from the mean.

This improved MVRV Z-score can provide a more responsive framework for identifying key market turning points throughout the cycle and help adjust for overall peak declines near extreme values.

Now that we have optimized the rolling window to 1 year, we can extend this framework to work backwards to calculate the threshold price levels that define these recent peaks and troughs.

Bull markets are characterized by prices trading between 1-year averages, with peaks above around 2σ. Conversely, bear market prices remain below average, significantlyThe low occurred near -1.5σ. This structured approach allows for a clearer delineation of market stages.

Currently, Bitcoin is trading at $94,398, above the 1-year average of $909,000 but below the +2σ threshold of $1.126 million. This suggests that the market is still in a bullish phase, although it has pulled back slightly from its recent highs, when it was above the upper limit.

The 1-year MVRV Z-score model shows the market cooling off from a strong rally and we can now assess investor profitability by measuring unrealized losses on holdings. This helps gauge the incentives of market participants and identify key risk areas that require attention.

First, by analyzing the physical adjusted cost basis distribution of circulating supply, it is clear that all unrealized losses are concentrated among short-term holders - those who purchased in the past 155 days (near the market peak) Investors in tokens.

Focusing on the pressure on short-term holders as potential sellers, we can look for areas where unrealized losses could become severe if the current market decline intensifies.

The average cost basis for short-term holders is currently $884,000. Based on similar statistical methods as above, we also show the high ($1.255K) and low ($685K) ranges that represent the typical extremes of price action during bull and bear markets.

Spot prices are currently 9.2% above short-term holders' cost basis, indicating that the market remains in the realm of a typical bull market. However, if the market fails to regain upward momentum, a fall below STH's cost basis becomes more likely, which could lead to short-term pressure and the potential for additional selling if investors begin to panic.

To better gauge the level of stress experienced, we can assess the BTC supply that is currently at a state of unrealized losses. From a historical perspective, over the past 10 years, we can observe:

During bull markets, the number of BTC lost has typically remained below 4 million.

At the beginning of the bear market, the number of BTC losses reached 4 million to 8 million.

This week, market volatility resulted in the loss of 2 million to 3.5 million BTC. While the losses were significant, the range was still lower than the 4 million BTC lost during the local market lows between July and September 2024. This indicates that the current market may be in a more depressed state than the previous adjustment stage.

Another dimension of market pain is the relative unrealized losses metric, which measures unrealized losses (in U.S. dollars) relative to market capitalization. A look back at recent cycles reveals similarities between the current market and the 2016-17 bull market.

With 2019-2The 2-year cycle is different. In the 2019-22 cycle, external shocks such as the COVID-19 epidemic pushed relative unrealized losses to levels above 10%, while the consolidation phase in Q3 2024 only pushed this indicator higher. to about 4.3%.

It can be argued that the current market cycle is experiencing less stress, likely due to smaller drawdowns, lower volatility, and new spot demand via ETFs and institutional investors.

Bitcoin has entered a correction phase, trading 11.1% below its all-time high of $108,000. However, spot prices are still trading above several key support levels, suggesting that the current bullish market structure remains intact. This is exacerbated by the relatively mild nature of market distress, as measured by historically small unrealized losses held by market participants.

We also show how MVRV z-scores optimized using a 1-year rolling window provide a framework for dealing with recent bullish and bearish market phases. According to this model, we remain within bullish territory, although the cost basis for short-term holders remains at $88,400, a key level to maintain constructive sentiment.