An analyst has highlighted how Bitcoin has consistently bottomed between the 1.0 and 0.8 MVRV price bands over the past decade.
Bitcoin has still not fallen below the 1.0 MVRV band in this cycle
In a new after on X, analyst Ali Martinez discussed historical Bitcoin bottoms from the perspective of the MVRV price bands. This is an on-chain BTC pricing model based on the popular Market Value to Realized Value Ratio (MVRV).
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The MVRV ratio measures how BTC’s market capitalization, a representation of the value investors carry in the present, compares to its Realized Cap, a proxy for the total capital invested in the cryptocurrency. Basically, this indicator tells us about the profit-loss balance of BTC holders as a whole.
When the value of the MVRV ratio is greater than 1.0, it means that the average investor is currently holding a net unrealized gain. On the other hand, being below the threshold implies the dominance of losses on the network.
In general, the higher investors’ profits become, the more likely they are to participate in profit-taking. Thus, peaks are more likely to occur as the MVRV ratio moves well above 1.0. Similarly, sales may become depleted when most of the supply is underwater, implying that bottoms may become likely at low MVRV levels.
Based on this behavior, on-chain analytics company Glassnode created the MVRV Pricing Bands, a model that highlights Bitcoin price levels that correspond to certain key MVRV Ratio levels.
Below is the chart for the indicator shared by Martinez.
The chart shows that Bitcoin price has been trading below both the 2.4 and 3.2 bands for some time now. These levels, which are around $130,000 and $174,000 respectively, correspond to thresholds at which the risk of profit realization becomes significant.
The cryptocurrency has been experiencing bearish momentum lately, but the price has still remained above the 1.0 level. This means that despite the pullback, investors as a whole have remained in a state of net unrealized gain.
In the chart, the analyst has indicated a pattern that Bitcoin tends to follow with MVRV price bands. “Over the past decade, Bitcoin $BTC has consistently bottomed between the 1.0 and 0.8 MVRV price levels,” Martinez said. Currently, these levels are around $54,000 and $43,000 respectively.
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It now remains to be seen whether BTC will continue to fall in the near future and retest this historic low, or whether the asset will find a bottom before that, breaking the pattern of the previous cycles. The coin has already broken one pattern this time: it has failed to break the 3.2 level once.
BTC price
At the time of writing, Bitcoin is trading around $73,000, up more than 6% in the past week.
Featured image of Dall-E, chart from TradingView.com