Bitcoin Hits Yearly Low at $74.5K, MVRV Signals Undervaluation

The sell-off that pushed Bitcoin to $74,500 was characterized by heavy institutional withdrawals, particularly from U.S. spot Bitcoin ETFs. Products like the Grayscale Bitcoin Trust (GBTC) and the iShares Bitcoin Trust (IBIT) led significant outflows, pushing overall crypto fund flows deep into negative territory. This institutional retreat created a sharp downdraft in price, erasing a substantial portion of the year’s gains in a short period.

According to analysis from Bitwise, this price action drove Bitcoin’s two-year rolling MVRV z-score to its lowest reading ever. This metric, which compares the market price to the average cost basis of holders adjusted for volatility, is a key indicator of relative valuation. A record-low score points to widespread, distressed selling and suggests the asset is deeply undervalued relative to its recent history, potentially signaling a fire-sale environment for long-term holders.

On shorter time frames, signs of bargain hunting have appeared to stabilize the decline. As Bitcoin’s daily Relative Strength Index (RSI) plunged into the low 20s—a historically oversold zone—spot volume data on major exchanges like Binance and Coinbase showed net aggressive buying. This helped Bitcoin recover toward the $79,420 level. Crucially, this buying occurred without a corresponding spike in open interest, and funding rates remained negative.

This market behavior is significant. It indicates that buyers were purchasing the actual asset on the spot market rather than piling into leveraged long positions using derivatives. This dynamic reduces the immediate risk of a cascade of forced liquidations, which can exacerbate price moves and create messier, more volatile downtrends. The clean-out was instead concentrated in existing leveraged bets, with reports indicating close to $2 billion in BTC long liquidations across derivatives markets last week alone.

The current landscape presents a contradictory picture. On one hand, strong selling pressure from institutional products and record-low valuation metrics like the MVRV z-score paint a bearish backdrop. On the other, the liquidation of over-leveraged longs has cleared some speculative excess, while the emergence of spot buying and oversold technical conditions hint at a potential floor.

Historically, dips into the extreme RSI zone witnessed last week have been followed by roughly 10% rebounds most of the time since August 2023. Furthermore, the market structure now contains a potential catalyst for upward volatility: billions of dollars in short positions are clustered near higher price levels, around $85,000. If Bitcoin climbs, covering these short positions could add significant fuel to a bounce. This creates what analysts describe as an asymmetric trade setup, where the potential upside from current levels may outweigh the near-term downside for traders comfortable with volatility.

However, the conclusion remains cautious. Institutional flows, as evidenced by the outflows from GBTC and IBIT, signal that major holders are stepping back. The near-term path is likely to be bumpy, dictated by whether spot market bargain hunting can sustainably counterbalance institutional selling and poor sentiment. Traders must weigh the compelling undervaluation signals and pockets of buying against the very real possibility of further weakness if market sentiment deteriorates once more.