Bitcoin's Fair Value Gap Narrows as On-Chain Data Flags Potential Market Bottom

Recent market activity has highlighted a significant fair value gap between Bitcoin’s current trading levels around $77,600 and its historical valuation benchmark of approximately $98,000. According to market analysis, this pricing divergence reflects a critical juncture in the current market cycle, with multiple on-chain indicators converging to suggest that the asset has approached a potential accumulation zone.

Evaluating the Fair Value Gap Through Market Metrics

The MVRV (Market Value to Realized Value) indicator—derived from historical average calculations—establishes a central valuation benchmark around $98,000, representing the midpoint range of market pricing regression. Analyst Murphy notes that the current gap between Bitcoin’s spot price and the average cost basis of active market participants has compressed significantly, suggesting that the excessive valuation premiums that characterized earlier market phases have largely been eliminated. This convergence between price and realized value creates what many market participants interpret as a fair value zone where rational accumulation patterns typically emerge.

If market conditions stabilize within this range, opportunistic buying should logically follow. However, if downward pressure persists beyond this level, markets risk entering an irrational desperation phase or what analysts describe as a confidence collapse territory.

On-Chain Indicators Signal a Shift in Market Dynamics

The Percentage of Supply in Profit (PSIP) metric currently stands at 72%, positioning Bitcoin within the upper boundary of a typical bull market correction range (70%-75%). This reading indicates that most holders remain profitable—a structural condition that historically has limited further capitulation selling.

More significantly, data excluding Satoshi Nakamoto’s early holdings and provably lost coins reveals that approximately 40% of remaining supply is currently underwater on a cost-basis calculation. This represents a substantial portion of holders who have experienced price depreciation from their entry points.

Identifying the Bottom Range and Cycle Implications

The proportion of long-term holders recording losses has expanded noticeably, creating a market structure that analysts interpret as approaching cyclical bottom territory. Should this correction fail to mark the limit of a bull market adjustment phase, the alternative interpretation suggests an emerging bearish cycle may be initiating.

This fair value gap analysis underscores that Bitcoin’s current positioning reflects measurable distance from peak euphoria pricing, potentially establishing the technical foundation for the market’s next directional phase.