The current trend in the Bitcoin Market Value to Realized Value (MVRV) Ratio suggests that a peak has yet to be reached in this cycle.
Bitcoin MVRV Ratio Has Not Yet Reached Previous Cycle Peaks
According to a recent post on X, market intelligence platform IntoTheBlock sheds light on the historical trends of the Bitcoin MVRV Ratio. The “MVRV Ratio” is a well-known BTC on-chain indicator that compares the market cap and realized cap of the asset.
The market cap represents the total value of the cryptocurrency’s supply at its current price. Conversely, the realized cap is an on-chain capitalization model that values each coin based on its last transactional price, which is considered its ‘true’ value.
By assuming that the last transfer for the majority of coins reflects the last time they changed hands, the price at that time serves as their cost basis. Therefore, the realized cap estimates the sum of the cost basis of all BTC tokens.
In simpler terms, it indicates the overall capital that investors have invested in the cryptocurrency, while the market cap reflects its current valuation held by investors.
Thus, the MVRV Ratio, which juxtaposes these two metrics, provides insights into the profit or loss status of the Bitcoin userbase. A ratio greater than 1 indicates that investors are in a net profit state, while a ratio under this threshold signifies that losses are prevalent.
Here is a chart illustrating the trend of the Bitcoin MVRV Ratio over the past decade:
The metric has shown a downward trend recently | Source: IntoTheBlock on X
As evident in the chart above, the Bitcoin MVRV Ratio experienced a spike during the rally to a new all-time high (ATH) in the first quarter of the year, as investors’ profits swelled.
Historically, Bitcoin’s peaks have tended to occur as holder gains have inflated, prompting investors to sell when their profits reach substantial levels.
Consequently, high MVRV Ratio values can indicate that the cryptocurrency is becoming overpriced, signaling a potential correction. Earlier this year, at the peak price, the indicator reached a high of 2.64, illustrating that the market cap had surpassed the realized cap by more than double.
IntoTheBlock notes that the highest recorded value of this indicator was 4.35 during the 2017 bull market and 3.7 during the 2021 bull market. The recent peak in the MVRV Ratio has yet to approach either of these figures, and the analytics firm concludes that the current value “appears relatively low to indicate a market top.”
BTC Price
As of this writing, Bitcoin is trading around $60,600, reflecting a decline of approximately 7% over the past week.
The coin appears to be experiencing bearish conditions recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, IntoTheBlock.com, chart from TradingView.com
