bitcoin‘s MVRV ratio, an on-chain indicator, could suggest that the asset may not yet have peaked for the current rally.
bitcoin MVRV Ratio Says Market Is Not Overheated Right Now
According to data from the market intelligence platform In the block, bull markets of the past reached their peaks when the MVRV index crossed the 300% mark. “Market Value to Realized Value Ratio (MVRV)” refers to an indicator that tracks the relationship between bitcoin‘s market capitalization and realized capitalization.
The “realized limit” here is a capitalization model for btc that calculates the total value of the cryptocurrency assuming that each coin in circulation is worth the same as the price it last moved at, rather than the current spot price.
As the price at which a coin last moved on the blockchain was likely the price at which it changed hands, the realized limit can be interpreted as the total amount of capital that investors as a whole have invested in the asset.
The MVRV index compares the price of the currency (the market cap) to the realized limit, so it can tell us if investors have more or less than they invested.
Now, here is a chart showing the trend in bitcoin‘s MVRV ratio over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Is-Bitcoin-on-top-here-This-metric-would-say-the.png" alt="bitcoin MVRV Ratio” width=”1120″ height=”330″ loading=”lazy”/>
Looks like the value of the metric has been going up in recent days | Source: IntoTheBlock on X
In the chart above, bitcoin‘s MVRV ratio is shown as a percentage. At the 100% mark, the two capitalization models approach an equal value, suggesting that the market as a whole is barely breaking even.
Above this threshold, investors have a net amount of profits, while below they have losses. From the chart, you can see that the btc MVRV ratio has remained above the break-even point in recent months as the price of the asset has seen a rebound.
Currently, the metric floats around the 150% level, suggesting that the market capitalization is 50% larger than the realized capitalization. Historically, the higher investors’ profits have been, the more likely they are to engage in a liquidation.
For this reason, highs are usually formed when the MVRV ratio reaches high levels. IntoTheBlock notes, however, that bull markets in the past typically only reached their peaks when the indicator crossed the 300% mark.
Clearly, the indicator is still a significant distance away from this mark at the moment. This could be a potential sign that bitcoin‘s rally has not yet reached an overheated state and therefore, there could be more to come for the cryptocurrency’s price in terms of bullish momentum.
btc Price
bitcoin‘s rally hit the pause button last week as the asset’s price moved sideways. Currently, the coin is trading around $34,500.
<img decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Is-Bitcoin-on-top-here-This-metric-would-say-the" alt="bitcoin price chart” width=”1534″ height=”869″ loading=”lazy”/>
The value of btc appears to have gone stale in the last few days | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, IntoTheBlock.com
