The Z-score metric, in the context of digital assets, is a statistical tool used to identify periods of extreme overbought or oversold conditions relative to an asset’s historical average. It measures how many standard deviations an observation is from the mean. A high positive Z-score suggests an asset is significantly overvalued, while a low negative Z-score indicates undervaluation. This metric helps assess market extremes.
Context
Crypto analysts frequently apply the Z-score metric to on-chain data, such as market-value-to-realized-value ratios, to identify potential market tops or bottoms. News reports discussing market cycles or investor sentiment often reference Z-scores as an indicator of asset health. It provides a quantitative measure for evaluating whether an asset’s price is statistically abnormal. This tool assists in making informed trading and investment decisions.
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