MVRV (Market Value Realized Value)
MVRV (Market Value Realized Value) is a comparison of the market capitalization (Market Cap) of a cryptocurrency and the asset’s price of this currency one day before.
Market Value
It is made up of a cryptocurrency’s current market price and total supply. Simply put, the total value of the market at today’s prices.
Realized Value
For each cryptocurrency you just multiply the last price it was transferred at by total supply. This is how much the cryptocurrency is valued at that price.
MVRV Calculation
MVRV = Market Value / Realized Value
Meaning of MVRV
Overbought and Oversold Contidions
High MVRV:
This refers to a state where the market capitalization is high relative to the realized value. It means that the market price is historically high and investors are basically making money. In this case, the market may be overbought.
Low MVRV:
Means that the market value is low relative to realized value. The market price is historically low and investors are in fact losers. In this case, the market may be oversold.
Market Psychology
The MVRV ratio can be interpreted as reflecting the general attitude and behavior of market participants in situations of profit or loss. High MVRV may be taken to mean greater confidence on the part of investors in making a profit. This might lead to higher prices. Low MVRV could be indicative of a more cautious investor attitude. The results of which may be higher prices being negotiated.
Trend and Price Analysis
Changes in the MVRV ratio can be used to understand changes in cryptocurrency valuations and market trends. In particular, MVRV values that are extremely high or low can be seen as potential indicators of a market turning.
MVRV Z-Score
Whether the MVRV is above or below historical averages it shows. This measures how “abnormal” or “common” MVRV actually is relative to history, and to what extent away from historical norms it currently lies.
MVRV-Z-Score Calculation
MVRV-Z-Score = (MVRV – Average MVRV) / Standard Deviation
Average MVRV: The historical MVRV average.
Standard Deviation: The historical MVRV standard deviation.
Examples
A virtual currency with MVRV ratio of 2.5 might mean the market is super overpriced. Traders could also be fairly in the money. This could indicate that the price is inflated and there may be a correction in the offing.
If MVRV-Z-Score goes to 3.0, it has fallen away from the historic average level (hope high). This may indicate that the market is at a top and relatively higher chance of reversal in prospect.
During this chart, when Realized Value surpasses Market Value, the dots drop: respective MVRV data points cry out “sell” (yellow dot). This is a hint of an imminent turn around. Alternatively (red dot compare MVRV Z-Score periods with history and deduct value below history level mark), this may be a time to sell not buy.
Revised Conclusions for Academia
Our paper has shown an effective way to determine whether the cryptocurrency market is overvalued or undervalued, utilizing historical sentiment indicators like MVRV and Z-Scores. These two metrics are complementary: apart from reflecting changes in the market’s emotion, they also locate many major historical inflection points when Z-Scores actually turn positive.
In order to achieve more comprehensive researches, these metrics should be combined with other onchain indicators. These may range from trading volume and volatility measurements to liquidity data and more general indicators of regulatory and structural markets. Combining various data sources ensures better accuracy in analysis and smarter policy decisions.
In other words, MVRV rates that are too high could indicate excessive risks of correction, while too low MVRV rates could imply areas of potential accumulation. However, owing to fast-changing market conditions that are not always predictable, it is a must even when incorporating MVRV into your trading structure to keep tight risk control.
Disclaimer
The information and opinions expressed in this report are offered solely for educational as well as informational purposes. None of the contents herein should be considered financial advice, investment guidance, trading advice or legal counsel.
Digital currency markets are both volatile and speculative. MVRV and MVRV Z-Score are tools for analysis, but not harbingers of future market outcomes. The application of this material for trading or investment purposes is entirely the reader’s own exposure.
Readers are strongly encouraged to do their own research (DYOR), take into consideration their own financial situations and consult with a licensed financial advisor or other qualified professionals when choosing any investment in digital assets.
The subjects and publishers decline all responsibility for any financial losses, damages or harmful outcomes arising from readers’ use or interpretation of this information. Past behavior and historical benchmarks provide no certainty about future results.
