Here’s what the historical trend of Bitcoin’s market cap to realized value (MVRV) ratio suggests regarding whether or not the current uptrend is over.
The Bitcoin MVRV ratio can indicate where BTC is in the current cycle
In new mail On The MVRV ratio refers to a common on-chain metric that, in short, tracks how the value held by BTC investors (i.e. market value) compares to the value they initially placed in the asset (realized value).
When the value of the ratio is greater than 1, it means that it can be assumed that investors as a whole are in profit. On the other hand, it is below the mark, which indicates loss dominance in the market.
The version of the MVRV ratio published by Young Ju is not the normal version, but a modified model called “True MVRV”. This variation only takes into account data for currencies that have been involved in some type of transaction activity within the past seven years.
Coins that are more than seven years old can be presumed lost forever, either because they were forgotten or because the keys to their wallet were lost. As such, True MVRV, which excludes those coins that will likely never return to circulation, can provide a more accurate picture of the sector than the regular version of the metric.
Now, here is a chart showing the trend in this Bitcoin indicator throughout the history of the cryptocurrency:
As shown in the chart above, Bitcoin True MVRV rose to relatively high levels during this rally. This means that the average investor makes notable profits.
Historically, the higher a holder’s gains, the more likely they are to engage in mass selling motivated by profit-taking. Therefore, when MVRV rises higher, a top could become a potential for BTC.
From the chart, it appears that the peaks over the past sessions occurred when the indicator crossed a certain line. So far, the measure has not come close to retesting this recent era level.
According to the founder of CryptoQuant, the reason why the market cap has not risen compared to the maximum achieved so far is that there are still $7 billion in capital flows entering the Bitcoin market every week.
If the current cycle were to show anything similar to previous cycles, a rising, but not too high, true MVRV value could indicate that there is room for BTC remaining in the current uptrend.
Bitcoin price
Bitcoin has regained its Christmas high as its value has now fallen to $95,700.
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