A quant has explained how ethereum is now in its secondary bull run phase based on the trend of this popular on-chain indicator.
ethereum MVRV Ratio Is Forming a Similar Pattern to the Previous Two Cycles
In a quick shot from CryptoQuant mailAn analyst talked about the latest trend in the market value to realized value (MVRV) ratio for ethereum. The “MVRV Ratio” is an on-chain metric that tracks the relationship between the asset's market capitalization and its realized capitalization.
The cap made here refers to a capitalization model that calculates the total value of eth assuming that the value of each token is equal to the price at which the last transaction was made on the network.
In fact, the model is a measure of the sum of the costs of all tokens in circulation or, more simply, a measure of the amount of capital that investors have invested in the asset. As such, the MVRV Ratio indicator compares the market capitalization, which is just the total value that holders currently have, with this initial investment.
When the metric value is greater than 1, it means that the market capitalization exceeds the realized capitalization. This trend implies that investors as a whole are in a state of net profit. On the other hand, being below the threshold suggests the dominance of losses in the market.
Now, here is the chart shared by the analyst showing how the value of the ethereum MVRV Ratio has changed over the past few years:
<img data-recalc-dims="1" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/11/Ethereum39s-39Secondary-Bull-Run39-Is-Here-Quant-Explains-Why.png" alt="ethereum MVRV Ratio” width=”1280″ height=”802″/>
The value of the metric appears to have sharply been moving up in recent days | Source: CryptoQuant
As can be seen in the chart above, ethereum's MVRV ratio spiked to a relatively high level during the first quarter of the year as the price rally occurred. However, in the bearish consolidation that followed the run, the indicator cooled again and returned to the neutral level 1.
With the cryptocurrency's latest surge, the MVRV index has once again witnessed an upward reversal. Interestingly, something like this was also observed during the last two bull markets, as marked by the quant on the chart.
It would appear that both runs involved two phases where ethereum's MVRV ratio increased to extreme levels, with a cooldown between the two.
If the current cycle is to show something similar, then the rally at the beginning of the year could have been the first of the phases, and the most recent rally could have taken the role of the second.
In the previous two cycles, the secondary bull run took the price to levels noticeably higher than the first, so ethereum could soon surpass the high from the beginning of the year. Of course, this would only be possible if this pattern continues during the current cycle.
eth price
At the time of writing, ethereum is trading at around $3,600, up almost 8% from last week.
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Looks like the price of the coin has been on the rise recently | Source: ETHUSDT on TradingView
Dall-E Featured Image, CryptoQuant.com, TradingView.com Chart
