Bitcoin Records $75,000 All-Time High: Here’s If BTC Is ‘Overheated’ Now
2024年11月7日 - 6:00PM
NEWSBTC
Here’s what the legendary Bitcoin Market Value to Realized Value
(MRVRV) Ratio says about whether Bitcoin is currently overheated or
not. Bitcoin MVRV Ratio Has Risen Alongside The Latest Rally In a
CryptoQuant Quicktake post, an analyst has discussed about the MVRV
Ratio of Bitcoin. The “MVRV Ratio” is an on-chain metric that keeps
track of the ratio between the Bitcoin market cap and realized cap.
The market cap here is just the total valuation of BTC’s
circulating supply at the current spot price. The other metric, the
realized cap, is also a capitalization model for the asset, but it
doesn’t work so simply. Related Reading: Ethereum Volatility Soon?
Derivatives Exchanges Receive 82,000 ETH In Deposits Unlike the
market cap, this model doesn’t put the same price on every coin in
circulation; rather, it assumes that the last price at which a
token was transacted represents its ‘true’ value. The previous
transaction of any coin is likely to represent the last point it
switched hands, so the realized cap essentially takes the sum of
the cost basis of all tokens in circulation. One way to look at
this model is as a measure of the amount of capital that the
investors as a whole have put into the cryptocurrency. The market
cap, in contrast, signifies the value that these holders are
carrying in the present. When the MVRV Ratio is greater than 1, it
means that the market cap is above the realized cap right now. Such
a trend suggests the investors as a whole are in a state of net
profit. On the other hand, the indicator being below this mark
implies the average holder is currently underwater as they are
holding their coins at a value below the price they bought them
for. As displayed in the above graph, the Bitcoin MVRV Ratio had
surged to significant levels back when BTC had broken the November
2021 all-time high (ATH) in the first quarter of the year. An
increase in the metric has also followed in the new ATH break, but
the metric is clearly not near the same high as earlier in the year
yet. Historically, the cryptocurrency has made tops whenever the
indicator has risen to high levels. As the quant has marked in the
chart, however, how high is a ‘high’ MVRV level has been declining
over the last few cycles. If the trendline drawn by the analyst
holds, then the current cycle should see a top around when the MVRV
Ratio would hit a value of around 3. At present, the metric is at
2, so there may still be a while to go before Bitcoin becomes
overheated. Related Reading: Dogecoin Rockets Up 12%, But This FOMO
Signal Could End Rally As for why the asset tends to get overheated
when the MVRV Ratio shoots up, the reason is that investors become
increasingly likely to take part in profit-taking the larger their
gains get. BTC Price At the time of writing, Bitcoin is trading
around $74,100, up almost 8% over the last 24 hours. Featured image
from Dall-E, CryptoQuant.com, chart from TradingView.com
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