Since 170 days ago, the Bitcoin MVRV Ratio has been stuck below 1.
The MVRV ratio has fallen as low as 0.74 so far in this bear, as one expert noted in a CryptoQuant post.
The ratio between the market capitalization and realised capitalization of Bitcoin is measured by the “MVRV ratio.”
The “realised cap” in this case refers to a BTC capitalization model where the value of each coin in circulation is determined by the most recent purchase or sale price. The value of BTC is then calculated by adding up each of these numbers for the whole supply.
This is different from a market cap, which assigns each coin a value equal to the current price of Bitcoin. The benefit of the realised cap is that it serves as a kind of “actual value” for the cryptocurrency because it accounts for each market participant’s cost basis.
Therefore, comparing the two caps—which is what the MVRV ratio does—allows us to determine whether the price of bitcoin is currently undervalued or overvalued.
The graph above shows that during the past few months, the Bitcoin MVRV ratio has been below 1, which indicates that the market cap has been lower than the realised cap.
The indicator had readings below than 1 for 300 days during the 2014–15 bear market, and during this time it even dropped as low as 0.6.
However, the cycle for the 2018–19 bear was shorter because it spent only 134 days in this region. Additionally, it did not dip as low (0.69) as it did in 2014–15.
The indicator has so far spent 170 days in this area during the current Bitcoin cycle, with a low of 0.74.
As a result, the MVRV ratio in this area is now longer than it was during the previous cycle, however it is still short of the length observed in 2014–15.
Bear bottoms in the cryptocurrency price have previously been seen in the zone below 1. On the other side, tops have been witnessed when the ratio is bigger than 3.7.