BeInCrypto looks at on-chain indicators for Bitcoin (BTC), specifically Market Value vs. Realized Value (MVRV).
MVRV for BTC
MVRV measures the ratio between market and realized capitalization levels. Values greater than one indicate that the market capitalization is greater than realized. Very high ratios show an overvalued market.
The indicator is currently giving a reading of 1.71. Historically, this whole 1.70-1.80 area has been crucial in determining the direction of the trend. It initially acted as resistance in early 2020, ahead of the March 2020 low. After a period of consolidation inside, an upward move began in October 2020, leading to the current all-time high price.
Subsequently, the zone rebounded from the July 2021 low.
MVRV is back in this area once again. It is crucial that it rebounds for the uptrend to remain intact.
Looking at all of the indicator’s values since 2011, we can see that it has generated bearish divergence (black lines) only twice in its history.
The first took place over a three-month period between June and September 2017. As the price of BTC fell from a high of $2,000 to $4,000, the indicator fell from 3.6 to 3 This means that if the price of BTC has increased, the difference between its market and realized capitalization levels has decreased.
Since an increase in the price of BTC always leads to an increase in market capitalization, this means that the realized capitalization has increased at a higher rate than the market capitalization. It can be seen as a bullish sign, since it would suggest that the rise in prices is accompanied by an increase in transactions.
The second divergence occurred over a seven-month period, specifically from February to October 2020. The price of BTC fell from a high of $64,854 to the current all-time high of $69,000. However, the indicator’s reading fell from 3.95 to 2.84. Therefore, the current bearish divergence was even more pronounced than that of 2017.
After the 2017 divergence, BTC followed a parabolic run and went from $4,000 to $20,000 in just under six months. It remains to be seen if the current divergence will yield a similar result.
For the latest Bitcoin (BTC) analysis from BeInCrypto, click here.
All information contained on our website is published in good faith and for general information purposes only. Any action the reader takes on the information found on our website is strictly at their own risk.