Cryptocurrencies, such as Bitcoin often show cyclical fluctuations in their market value which is sometimes hard to predict, but it appears that the current market behavior indicates the early stage of a bull market. The Market Value to Realized Value Ratio, or MVRV Ratio, which is calculated by dividing Bitcoin’s current market capitalization by its market capitalization at the realized price (i.e. the average price at which each individual Bitcoin token last moved), recently hit 1.48, its highest level since last April.
The MVRV Ratio is evaluated further with the MVRV Ratio’s Z-score, that is calculated by subtracting Bitcoin’s market cap from its realized cap and then dividing by the standard deviation of Bitcoin’s market cap throughout its history. This Z-score was last at around 0.71 on Monday which is normally an indication that Bitcoin has entered an early stage of a bull market.
In this context, it is beneficial for long-term investors to determine at what levels to take profit from their investments as the market also can be overheated according to the MVRV Ratio resultss. As history has shown, these changes in the MVRV ratio can signal the upcoming drastic movements in the Bitcoin price, with significant falls or sharp hikes. Even in the current bull market, the Realized Price saw a steep rise from around $6,000 to nearly $20,000. This lead to the appreciation of the 2.4 and 3.2 MVRV Ratio bands as well, pushing them to the current level of around $47,000 indicated by the lower of the two bands to around $63,000 as they're indicated by the higher one.
If such a growth continues, it is predicted that the MVRV Ratio might reach a staggering $140-150,000 in the lower of the two bands and $190,000 suggested by the higher. Considering the Bitcoin price is currently within the $50,000 range, this increase is expected to be achieved in the next couple of years. It remains a true potential that this value could be even higher, and in this uncertainty, investing with caution is highly advised.
Heidi Martin
- 2023-04-19
Exploring the Market Value to Realized Value Ratio (MVRV Ratio)
Cryptocurrency analysis can sometimes be difficult to predict. This article looks into the Market Value to Realized Value Ratio, it's Z-score, current market behavior, and what it can mean for long-term investors.
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