Undervalued Litecoin: Analyzing the MVRV Z-Score, Market Dynamics, and Upcoming Halving

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An onchain metric suggests that litecoin (LTC), the 12th largest cryptocurrency by market value, is trading at discounted prices. According to analytics firm Glassnode, litecoin’s market value to realized value (MVRV) Z-score was negative at press time, indicating that the cryptocurrency is undervalued relative to its fair value.

The market capitalization is calculated by multiplying the total number of coins in circulation by litecoin’s going market rate. On the other hand, the realized value is a variation of the market cap that adds the market value of coins when they last moved on the blockchain. By excluding all coins lost from circulation (more than 15%), the realized value is said to reflect the real or fair value of the network. The Z-score shows by how many standard deviations the market value differs from the realized value.

Historically, Z-scores above eight have signified overvaluation and bull market tops, while negative values have indicated undervaluation and market bottoms. The chart by Glassnode reveals that the Z-score has been consistently negative since July last year. In the past, the indicator has consolidated below zero and eventually paved the way for meteoric bull runs. If history serves as a guide, the path of least resistance for litecoin appears to be on the higher side.

That said, litecoin and the broader crypto market remain vulnerable to adverse macroeconomic developments like liquidity tightening and the state of the global economy. At press time, LTC changed hands at $92, representing a nearly 31% gain for the year. Prices clocked a one-month high of $95 early this week, as per CoinDesk data.

In early August, litecoin is set to undergo its third mining reward halving, following which the per-block reward paid to miners will reduce by 50% to 6.25 coins from 12.5 coins. While some market participants see this event as a positive catalyst for LTC price, others argue that this halving has already been priced in and may not have the same impact as previous ones.

In conclusion, the negative MVRV Z-score for litecoin indicates attractive entry points for investors, especially considering its historical performance. However, macroeconomic factors and an upcoming mining reward halving event could introduce some uncertainty into the market. Both the potential gains and associated risks should be carefully weighed by those considering an investment in litecoin.

Source: Coindesk

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