Understanding MVRV
MVRV (Market Value to Realized Value) is a pivotal on-chain metric for assessing whether Bitcoin’s price is undervalued or overvalued. By comparing Bitcoin’s market value to its realized value, MVRV highlights cyclical extremes that historically align with major market tops or bottoms.
Key Components:
- Blue Line: MVRV score
- White Line: Bitcoin price
How MVRV Is Calculated
Step 1: Market Value
Market Value = Bitcoin Price × Circulating Supply
(Analogous to traditional market cap calculations)
Step 2: Realized Value
Realized Value = Aggregate Cost Basis of All Bitcoins
- Cost Basis: The price at which each Bitcoin was last transacted (derived from blockchain data).
Final Formula:
[ \text{MVRV} = \frac{\text{Market Value}}{\text{Realized Value}} ]
Why MVRV Matters for Bitcoin Investors
Identifies Market Extremes:
- High MVRV: Signals euphoria/potential price tops.
- Low MVRV: Suggests undervaluation/near-bottom conditions.
- Neutral Benchmark: Realized value smoothes volatility, offering a stable reference point against erratic market value swings driven by sentiment (fear/greed).
- Historical Accuracy: Past cycles show MVRV peaks and troughs coinciding with Bitcoin’s cyclical highs and lows.
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Case Study: MVRV in Action
| MVRV Range | Market Phase | Bitcoin Price Tendency |
|------------|-----------------------|-------------------------|
| >3.5 | Overvaluation/Euphoria | Likely Correction |
| <1.0 | Undervaluation/Capitulation | Potential Reversal |
FAQs
1. What’s the ideal MVRV range for buying Bitcoin?
Values below 1.0 often indicate strong buying opportunities, though macro trends should also be considered.
2. How does MVRV differ from P/E ratios in stocks?
While P/E compares price to earnings, MVRV contrasts market sentiment (price) with historical investor behavior (cost basis).
3. Can MVRV predict short-term price moves?
No—it’s best for identifying long-term cycles rather than daily fluctuations.
👉 Explore real-time MVRV charts to track live data.
Further Reading
- Original Concept: David Puell and Murad Mahmudov’s Bitcoin MVRV Ratio.
- Related Metrics: SOPR (Spent Output Profit Ratio) for profit/loss analysis.
Pro Tip: Combine MVRV with other on-chain indicators (e.g., NUPL, Hash Ribbons) for robust market insights.