Bitcoin MVRV (Market Value to Realized Value) ratio is defined as Bitcoin's market capitalization divided by realized capitalization. Basically, MVRV shows the ratio between the current price and the average price at which coins were bought. We have seen in the past that when the MVRV ratio reached the red zone, the market was in a state of extreme euphoria and excitement, and the price of Bitcoin was close to topped out, followed by a subsequent selling. When the MVRV ratio reached the green zone, the market was in a state of panic and fear, and the price was close to bottomed out and formed bullish reversals. In order ro read the chart more easy, an MVRV above 3.7 may indicates selling opportunities, while an MVRV below 1.0 may indicates buying opportunities. We can say that MVRV ratio it is providing valuable information about market trends and it is helping to identify periods when Bitcoin is on average overvalued (possible sell zone) or undervalued (possible buy zone). MVRV ratio is an informative tool that provides useful insights to identify possible market tops and bottoms by identifying the lowest and the highest zones in order to help investors to take better decisions on the long-term. MVRV ratio should be used in conjunction with other analysis tools to get a more complete picture of market's behaviour and trend, as part of your investment strategy.

Written by SimonaD