Be[in]Crypto takes a look at Bitcoin (BTC) on-chain indicators, this week focusing on Market Value-to-Realized Value (MVRV) and its return to positive territory.
MVRV Z-Score
MVRV is an indicator that measures the ratio between market capitalization and realized capitalization. Values above one indicate that the market capitalization is greater than the realized cap, while values below one indicate the opposite. Then the MVRV Z-Score uses one standard deviation to normalize the values.
Historically, readings between 7 and 9 have coincided with highs of the market cycle, while readings below 0 have coincided with lows. The indicator has been declining since February 2021 when it peaked at 7.53.
The indicator has fallen into negative territory four times since 2015 (black circles). This happened in:
- January 2015
- December 2018
- March 2020
- June 2022
Historically, after breaking out of its oversold territory, the indicator confirms that a bottom has been hit. In 2022, this happened on July 20th. Following history would mean that BTC has bottomed.
BTC realized price
The movement of the MVRV indicator can be better visualized using BTC and its realized price, an indicator that measures the price at the time of the last transaction.
While BTC fell below it, it has now reclaimed its realized price (black circle), which currently stands at $21,700. Historically, once the realized price has been reclaimed, BTC has never fallen below it before embarking on a significant bull run.
In addition, the time that MVRV was negative (red circle) was approximately 40 days, longer than March 2020 but shorter than December 2018 and January 2015.
Hence, these two indicators are aligned, suggesting that a bottom has been reached.
To be[in]Crypto’s latest Bitcoin (BTC) analysis can be found here
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