This Blockchain Indicator Might Show Bitcoin Rally Has Legs

Bitcoin’s price has nearly doubled this year, but the rally could have room to run. That’s based on a new report by Coin Metrics, a cryptocurrency data firm, which shows that bitcoin (BTC) is not at an extreme relative to the previous market top in 2018.

The MVRV ratio is a measure of bitcoin’s market value relative to its realized value. The gauge represents the difference between the cryptocurrency’s current price and the average price at which bitcoins were acquired. When it reaches an extreme, the thinking goes, traders might be inclined to take profits – creating sell pressure that could push price down.

  • The near 20% bitcoin selloff from an all-time-high around $60,000 last week triggered a decline in the MVRV ratio to 0.88.
  • “Historically, the periods that MVRV has dropped below 1.0 have been some of the best times to invest in BTC,” according to CoinMetrics.
  • The MVRV indicator reached an extreme around 4 in 2018, and near 6 in 2014, just prior to the start of bear markets.

This Blockchain Indicator Might Show Bitcoin Rally Has Legs
Chart shows the market value to realized value (MVRV) ratio not yet extreme relative to 2018.
Source: CoinMetrics

Bitcoin’s rally isn’t over yet, according to the MVRV metric, which is still lower than 2018 levels, Coin Metrics says.

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