Bitcoin MVRV Ratio At Make-Or-Break Test: Will Support Hold?
July 09 2024 - 12:00AM
NEWSBTC
On-chain data shows that the Bitcoin Market Value to Realized Value
(MVRV) ratio is doing a retest that has historically been
significant for BTC. Bitcoin MVRV Ratio Is Retesting Its 365-Day
SMA Right Now As explained by an analyst in a CryptoQuant Quicktake
post, the Bitcoin MVRV ratio is retesting a level that has acted as
an important psychological level in the past. The “MVRV ratio” here
refers to a popular on-chain indicator that, in short, compares the
value that the investors are holding (that is, the market cap)
against what they used to purchase the cryptocurrency (the realized
cap). When the value of this metric is greater than 1, it means the
investors can be considered to be in profit right now. Tops can
become more likely to form the higher the ratio above this mark, as
holders become increasingly tempted to harvest their gains. Related
Reading: Bitcoin ‘Extreme Greed’ Is Almost Here: Price Bottom Now
Close? On the other hand, the indicator being under the level
implies the dominance of losses in the market. Bottoms can be
probable in this zone, as sellers become exhausted here. Naturally,
the MVRV ratio is exactly equal to 1 suggests the investors are
holding profits and losses in equal parts, so the average holder
could be assumed to be just breaking even on their investment. Now,
here is a chart that shows the trend in the Bitcoin MVRV ratio, as
well as its 365-day simple moving average (SMA), over the last few
years: As displayed in the above graph, the Bitcoin MVRV ratio has
been observing a decline since the price all-time high (ATH) set
back in March. This trend is because BTC has been riding on bearish
momentum since then. Investor profits, which had once ballooned to
relatively high levels due to the rally, have taken a sizable hit
because of the price drop. However, holders are still very much in
gains, as the metric’s value is around 1.8 right now. The chart
shows that this is around the same level that the indicator’s
365-day SMA has been floating around recently. Historically, this
SMA has acted as an important level for the indicator, sometimes
taking the role of support during bullish trends. The MVRV ratio
crossing below this line has often meant a transition towards a
bearish trend for Bitcoin. As such, this current retest between the
indicator and the line can be significant for the cryptocurrency.
Related Reading: Social Media Screams “Sell” As Bitcoin Crashes To
$54,000: Buy Signal? It remains to be seen if this support level
holds or if the metric will drop below it, potentially leading to
an extended bearish period for BTC. BTC Price Bitcoin has only
slightly recovered from its latest crash so far, as its price is
trading around $56,900. Featured image from Dall-E,
CryptoQuant.com, chart from TradingView.com
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