Shiba Inu (SHIB), the famous meme coin, has witnessed a sharp 20% decrease in value in the past week. This substantial drop has caught the attention of investors, with an on-chain metric pointing to SHIB being undervalued, hinting at a potential buying opportunity.
Despite the favorable indication provided by the MVRV ratio, signaling the coin's undervaluation, the downward trend of SHIB may not have reached its conclusion.
A Closer Look at SHIB's Undervaluation
An evaluation of SHIB's Market Value to Realized Value (MVRV) ratio using a 30-day moving average reveals its current undervalued position. Data from Santiment shows the ratio standing at -29.35% at the time of writing.
The MVRV ratio of an asset gauges whether it is overvalued or undervalued by comparing its market value to its realized value. A negative MVRV indicates that the asset's market value is lower than its realized value, suggesting that it is undervalued relative to its initial purchase price.
While historically, negative MVRV ratios have presented buying opportunities for those eyeing to capitalize on dips and highs, the prevailing bearish sentiment surrounding SHIB implies a potentially limited chance of an imminent price recovery.
The negative funding rate of -0.03% for SHIB corroborates the bearish sentiment, as more traders bet on a further decline in the coin’s value.
Funding Rate Implications
The funding rate in perpetual futures markets represents the exchange of periodic payments between long and short traders to maintain the derivative's price proximity to the underlying asset. A negative funding rate indicates a bearish sentiment, where short traders pay long traders, anticipating a downward price movement.
While SHIB's current undervaluation, as indicated by the MVRV ratio, may attract traders keen on buying the dip, the prevailing bearish outlook suggests that the downward trajectory of SHIB may persist.
Looking Ahead: SHIB Price Predictions
With the Chaikin Money Flow (CMF) on the daily chart for SHIB reflecting a bearish sentiment at -0.03, indicating significant selling activity, the pathway for SHIB's price movement remains uncertain.
Should the demand for SHIB continue to wane, it is likely to extend its decline towards $0.000014. Conversely, if the distribution of the coin stabilizes, it could potentially lead to an uptick in SHIB's value, reaching as high as $0.000016.
In conclusion, while SHIB presents an undervalued status according to the MVRV ratio, the persisting bearish sentiment suggests caution for those considering buying the dip. Stay tuned for further developments in the dynamic world of SHIB trading.
Get the latest insights on top crypto platforms in February 2025 with Phemex, Bybit, Margex, BingX, and Сoinex.