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This Blockchain Indicator Might Show Bitcoin Rally Has Legs

Historically, the periods the MVRV ratio has dropped below 1.0 have been some of the best times to invest in BTC, according to Coin Metrics.

Mar 16, 2021 at 8:03 p.m. UTC
Updated Sep 14, 2021 at 12:27 p.m. UTC

Bitcoin’s price has nearly doubled this year, but the rally could have room to run. That’s based on a new report by Coin Metrics, a cryptocurrency data firm, which shows bitcoin (BTC) is not at an extreme relative to the previous market top in 2018.

The MVRV ratio is a measure of bitcoin’s market value relative to its realized value. The gauge represents the difference between the cryptocurrency's current price and the average price at which bitcoins were acquired. When it reaches an extreme, the thinking goes, traders might be inclined to take profits, creating sell pressure that could push price down.

  • The near 20% bitcoin sell-off from an all-time-high around $60,000 last week triggered a decline in the MVRV ratio to 0.88.
  • “Historically, the periods that MVRV has dropped below 1.0 have been some of the best times to invest in BTC,” according to Coin Metrics.
  • The MVRV indicator reached an extreme around 4 in 2018, and near 6 in 2014, just prior to the start of bear markets.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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