On-chain analysis: MVRV indicator shows that Bitcoin will continue to explode in the short term

Today, Bitcoin Magazine is looking at Bitcoin (BTC) on-chain metrics, more specifically Market Value at Realized Value (MVRV), to compare it to previous market cycles.

MVRV and its variation both support the possibility that Bitcoin will continue to rise and hit new all-time highs.

MVRV

MVRV is the ratio between the market capitalization and the actual capitalization of a coin. Simply put, an MVRV of 3 means that the market capitalization is three times the actual capitalization.

Historically, the 1.75 MVRV has acted as a strong support and catalyst for upside moves. This was seen in early September 2020.

At the low point in July 2021, it initially looked as if the MVRV had fallen below this value. However, it was only a small deviation and a strong rally followed (green arrow). Since this is an important level, the rebound that followed is a sign that the uptrend is still intact.

During the 2017 uptrend, the MVRV peaked just below Level 4 (black circle) before crashing. After that, however, another upward movement began, bringing the indicator to a new all-time high of 4.33 (yellow circle).

In the current trend, the peak of the MVRV in May is also just below level 4, very similar to the first level in 2017. If history repeats itself, Bitcoin could therefore rise significantly above the current level.

The source: Glass knot

MVRV Z-Score

The MVRV Z-Score is a variant of the MVRV On-Chain Indicator. It uses the standard deviation to scale the specified scale. This is done to determine the difference between market capitalization and reality as standard deviations.

Zone 7-9 (highlighted in red) is considered an overbought zone. The market capitalization is 7 to 9 times larger than the actual capitalization.

The peak value in 2021 has a value of 7.63. This level is significantly lower than the peaks from previous cycles, which were all above 9.

The source: Glass knot

KOL @caprioleio tweeted an MVRV Z-Score chart, saying that every time Level 3 is retaken there is a significant upward move. This happened three times in 2017 and is in line with the signal of the MVRV indicator described above.

The source: Twitter

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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