Altcoins across the industry have been underbought: Santiment

On-chain data from Santiment suggests altcoins across the cryptocurrency sector may be undervalued right now.

MVRV of the various Altcoins suggests undervalued conditions

This is evident from data from the on-chain analytics company Sanitationcryptocurrency assets have become underbought as traders now capitulate after a failed price recovery.

The relevant indicator here is the “MVRV” (Market Value to Realized Value), which measures the ratio between the market capitalization and the realized cap of a given cryptocurrency.

Here, the “realized limit” refers to a capitalization model for BTC that assumes that the value of each coin in the circulating supply is not the current spot price, but the price at which it was last traded on the blockchain.

This model aims to calculate a kind of “fair value” for the asset. Since the MVRV compares the market cap (i.e. current price) to the true value of the cryptocurrency, it can provide hints as to whether the price is currently too high or not.

Santiment has defined an “opportunity” zone and a “threat” zone for this indicator. As their names imply, the asset in question is underpriced when the metric is in the former area, while overpriced in the latter area.

Here is a chart showing the trend in the MVRV’s deviation from these zones for the various altcoins in the industry:

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

Whenever the MVRV divergence has a value of 1 or more, the indicator is said to be within the opportunity zone. Likewise, the danger zone occurs below a value of -1.

While these are the two extreme zones, with the metric firmly in either the positive or the negative zone (but not reaching either of these thresholds), it still indicates a slight underbought or price that is too high.

This means that the likelihood of bullish rebounds can increase when the indicator enters positive territory. The chart shows that the vast majority of coins in the digital asset sector are at least within positive territory right now.

This would imply that these coins have recently been underpriced. Some altcoins are also downright in the opportunity zone, suggesting that they may be offering low-risk buying opportunities right now.

However, there are a few cryptocurrencies that are in the negative zone, and a few even in dangerous territory. Such alts are more likely to register a decline in the near future.

Recently, the various altcoins have been trying to garner a rebound, but so far they have only seen failure. However, with prices starting to get undervalued, a break may soon be found.

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 by Art Rachen at Unsplash.com, charts from TradingView.com, Santiment.net