On-chain data shows that bitcoin's MVRV ratio is currently at the same high levels as those that led to the parabolic bull run in 2020.
bitcoin MVRV Ratio Soared as Latest Rally Happened
As CryptoQuant founder and CEO Ki Young Ju noted in a mail at X, the MVRV ratio has just reached a value of 2.5. The “Market Value to Realized Value Ratio (MVRV)” is a popular on-chain indicator that tracks the relationship between bitcoin market capitalization and realized capitalization.
The “realized cap” here refers to a capitalization model for btc that assumes that the true value of any token in circulation is not its current spot price (as considered by market capitalization), but rather the value at which the coin was sold. last transfer on the network.
The previous transaction of any coin can be considered the last time it changed hands, implying that the price at that time would be its current cost basis. As such, the realized limit adds up to the cost basis of each token in circulation.
This means that the realized limit essentially tracks the total amount of capital that investors have used to purchase their bitcoin. Since the MVRV index compares the market capitalization (that is, the value that investors currently have) with this initial investment, its value can tell us about the amount of profits or losses that investors as a whole currently have.
Now, here's a chart showing the trend in bitcoin's MVRV ratio throughout the history of the cryptocurrency:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-MVRV-Reaches-Levels-Leading-to-Parabolic-Bull-Run-in.jpeg" alt="bitcoin MVRV Ratio” width=”4096″ height=”2580″ loading=”lazy”/>
Looks like the value of the metric has been shooting up in recent days | Source: @ki_young_ju on X
As can be seen from the chart, bitcoin's MVRV ratio has increased rapidly as the asset's price has undergone its latest rally. In this increase, the metric has managed to surpass the 2.5 level.
When the ratio is greater than 1, it means that the market capitalization is greater than the realized capitalization at this time and therefore the overall market holds its coins with some profit. A value of 2.5 implies that the average wallet currently has gains of 150%.
“In November 2020, MVRV was $2.5 to $18,000, before the all-time high and parabolic bull run,” Ju explains. In that bull run, the first half of 2021 peak was not reached until the MVRV ratio crossed the 3.7 mark, as did the two bull runs that preceded it.
However, the November 2021 high did not follow this pattern as it formed near the 3.0 level. It now remains to be seen which path bitcoin will take in its current rally, if it is anything like any of these.
btc Price
Following bitcoin's impressive 22% rally over the past week, the asset's price is now trading around the $62,800 level, not far from setting a new all-time high.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-MVRV-Reaches-Levels-Leading-to-Parabolic-Bull-Run-in" alt="bitcoin price chart” width=”1534″ height=”854″/>
The price of the asset has gone through rapid growth over the past few days | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, CryptoQuant.com, TradingView.com chart
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