MVRV Ratio
MVRV (Market Value to Realized Value) ratio is defined as an asset's market capitalization divided by realized capitalization

Definition

MVRV (Market Value to Realized Value) ratio is defined as an asset's market capitalization divided by realized capitalization.
MVRV Ratio=Market CapRealized Cap\text{MVRV Ratio} = \frac{\text{Market Cap}}{\text{Realized Cap}}

Interpretation

By comparing two valuation methods, the MVRV ratio can tell us to get a sense of whether the price is fair or not, which means it is useful to get market tops and bottoms.
It is important to note that historically, it has been an outstanding indicator to spot market top/bottom or local top/bottom that occurred through three halvings.

By value itself

MVRV accounts both realized cap and market cap into account making certain values critical in making an investment decision.
  • Values over ‘3.7’: Possible Market Top
    If the values go above 3.7, it could be reasonable to sell the position off
  • Values under ‘1’: Possible Market Bottom
    If the values go under 1, it is time for taking a gradual long position.

By examining trend

If Market cap growth outpaces that of the realized cap, MVRV values rise indicating possible motive for selling.
  • Increasing trend: Increasing selling pressure
    As MVRV increases, it indicates that the market cap is outpacing realized cap meaning there is increasing motive for selling in the market.
  • Decreasing trend: Decreasing selling pressure
    As MVRV decreases, it indicates that realized cap is outpacing the market cap meaning there is decreasing motive for selling in the market.

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Last modified 1mo ago