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Here, the latest trends in the Bitcoin Market Value to Realized Value (MVRV) ratio suggest where the market currently sits at the top.
Bitcoin MVRV ratio drops to 2.34 level
According to market intelligence platform data Into the Blockthe crypto rally earlier this year caused the BTC MVRV ratio to skyrocket.
The “MVRV Ratio” is a popular metric that tracks the ratio of Bitcoin’s market capitalization to its realized cap. The former is simply the total valuation of the asset supply at the current spot price, while the latter is an on-chain capitalization model.
The realized upper bound measures the total supply value of a cryptocurrency, assuming that the true value of each coin in circulation is the last transferred price on the blockchain, rather than its current spot value. Measure.
One way to interpret the realization cap is that it takes into account the purchase price of all tokens in circulation (assuming that the last trade of all tokens is actually the last trade). ), it is basically the sum of total capital. Investors invested in the asset.
As such, the MVRV ratio shows how the total value a Bitcoin investor currently holds (i.e. market capitalization) compares to the value invested (realized cap).
Here is a graph showing the trend of Bitcoin MVRV ratio over the past few years.
Looks like the value of the metric has been turning down in recent days | Source: IntoTheBlock on X
As seen in the graph, Bitcoin’s MVRV ratio has been above 1 for some time. If the indicator has such a value, the market capitalization is greater than the realized cap, so the investor will receive a net profit.
The recent rise in assets has caused this indicator to surge to a relatively high level. This is a natural result of holders’ profits inflating as prices soar.
However, after the recent price decline, the MVRV ratio has also improved and is now trending downward. Currently, the value of this ratio is approximately 2.34.
“Traditionally, an MVRV ratio above 3 has been a reliable marker for predicting price peaks,” notes IntoTheBlock. So far in the current bull market, the indicator has not exceeded this mark. We’ve come close to that recently, but the recent decline means we’re a little further away from that level.
Why have historically tops occurred when Bitcoin’s MVRV ratio was high? The answer is that investors who want to profit are more likely to participate in the sell-off, and as profits grow, the temptation to take profits increases. It means that it only increases.
For this reason, selling is most likely to occur when the market sustains extreme levels of profits. This just reflects the high MVRV ratio value.
BTC price
At the time of writing, Bitcoin is trading at around $67,200, up 3% in the past 24 hours.
The price of the asset appears to have rebounded over the last few days | Source: BTCUSD on TradingView
Featured image by Yiğit Ali Atasoy on Unsplash.com, IntoTheBlock.com, Charts on TradingView.com
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