MVRV Z-Score

The MVRV Z-Score takes the dollar gap between market cap and realized cap and standardizes it by the historical volatility of market cap. Standardizing removes the effect of scale, so a given reading means the same thing in every cycle, which sharpens the extremes.

Subtract realized cap from market cap, then divide by the standard deviation of market cap over all history to date. Because the numerator can be negative (price below cost basis), it is not log-scaled.

Very high Z-scores, around 7 and up, have coincided with cycle tops, while readings near or below zero have coincided with bottoms. It is linear-normalized on the risk scale, since it can go negative.

The Z-Score's highest readings line up with the historical cycle tops, and it has dipped to or below zero at cycle bottoms.