Bitrabo Editorial
The Bitcoin Market Value to Realized Value (MVRV) Ratio appears to suggest that the market peak has not yet been reached in the current cycle.
Current Bitcoin MVRV Ratio Fails to Match Previous Highs
In a recent update on X, the analytics platform IntoTheBlock explored the historical patterns of the Bitcoin MVRV Ratio. This ratio is a widely used on-chain indicator that contrasts the market capitalization of Bitcoin with its realized capitalization.
The market capitalization reflects the total current value of the cryptocurrency based on its present price, whereas the realized capitalization gives a more accurate value by considering the last transaction price of each circulating coin as its ‘true’ value.
This approach assumes that for most coins, the last transfer represents the last price at which they were sold, setting the basis for their valuation. Consequently, the realized cap provides an estimate of the total cost basis for all Bitcoin tokens, representing the total funds invested by users in the cryptocurrency. Conversely, the market cap specifies what investors currently hold in value.
The MVRV Ratio, which juxtaposes these two metrics, gives insight into the overall profit or loss situation of Bitcoin holders. A ratio above 1 indicates that investors are predominantly in profit, while a figure below 1 suggests a prevalent loss.
Below is a chart depicting the Bitcoin MVRV Ratio trend over approximately the last ten years:
The chart showcases a significant increase in the MVRV Ratio during the recent rally, which saw Bitcoin reaching a new all-time high (ATH) in the first quarter of the year, reflecting substantial profits for investors.
Historically, Bitcoin tends to reach its peak when investor profits become excessively inflated, prompting holders to consider selling. Therefore, a high MVRV Ratio could signal that Bitcoin is becoming overpriced, potentially leading to a market correction. Earlier this year, during its price peak, the MVRV Ratio reached a high of 2.64, indicating that the market cap had exceeded the realized cap by more than double.
IntoTheBlock notes that previous peaks saw the MVRV Ratio hitting 4.35 during the 2017 bull market and 3.7 in the 2021 bull market. The current high in the MVRV Ratio has not approached these numbers, leading the analytics firm to conclude that it appears too low to indicate a market peak.
Current Bitcoin Price
As of now, Bitcoin’s trading price stands at approximately $60,600, reflecting a decline of about 7% over the last week.