According to an onchain metric, Litecoin (LTC), currently the 12th largest cryptocurrency based on market cap, appears to be undervalued in the market. The metric used to determine this is the market value to realized value (MVRV) Z-score, which currently registers in the negative for Litecoin, as per data from analytics company Glassnode.
The market cap of a cryptocurrency is computed by multiplying the current market rate of the coin with the total number of coins in circulation. In contrast, the realized value is a modified version of the market cap, taking into account the market value of coins at the time they were last transferred on the blockchain.
This excludes coins that have fallen out of circulation, which, in the case of Litecoin, amounts to more than 15%. It is believed to provide a more accurate representation of the actual or fair value of the network.
The Z-score, in this context, is an indicator of how many standard deviations the market value is from the realized value. Over time, Z-scores greater than eight have been associated with overvaluation and peaks in bull markets, while negative scores have pointed to undervaluation and market lows.
The fact that Litecoin’s Z-score remains negative indicates the cryptocurrency is still being traded at a relative bargain based on its historical standard. This trend of negative Z-scores has been ongoing since July of the previous year.
This isn’t a first for the metric. In the past, the Z-score has repeatedly dipped below zero, often serving as a precursor to significant bull market movements. Based on historical precedent, it seems that Litecoin’s price is more likely to rise than fall. However, it’s worth noting that Litecoin, along with the larger cryptocurrency market, is susceptible to various macroeconomic factors, including liquidity contraction and the overall state of the global economy.
At the time of reporting, Litecoin is being traded at $92, signifying an approximately 31% increase since the start of the year. Earlier this week, Litecoin’s price hit a one-month peak of $95, as per CoinDesk data.
Litecoin is poised for its third mining reward halving in early August. Following this event, the mining reward for each block will decrease by 50%, going from 12.5 coins to 6.25 coins.
