On-chain data shows that the Bitcoin Market Value to Realized Value (MVRV) Ratio has recently approached a death cross formation.
Bitcoin 30-day MA MVRV ratio may be about to fall below the 365-day MA
As explained by an analyst in a CryptoQuant Quicktake afterthe MVRV ratio is at risk of undergoing a death cross. The “MVRV Ratio” is a popular Bitcoin on-chain indicator that, in short, tracks how the value of the investors (i.e. the market capitalization) compares to the value they contribute (the realized capitalization).
Related reading
When the value of this measure is greater than 1, it means that the investors as a whole are currently in a state of net profit. On the other hand, the fact that it is below this threshold indicates the dominance of losses in the market.
Of course, if the MVRV ratio is exactly equal to 1, this means that the BTC holders have exactly the same amount of value in them as they initially put in, so they are just breaking even.
Here is a chart showing the trend in the Bitcoin MVRV Ratio, as well as the 30 and 90 day moving averages (MAs) over the past few years:
As shown in the chart above, the Bitcoin MVRV ratio had risen to quite high levels in March, as the price of the cryptocurrency had recovered to a new all-time high (ATH).
But as investors have taken and sold their profits during the long consolidation phase that has taken place since then, the indicator has fallen. That said, the indicator still stands at a value of 1.88, which indicates that the market capitalization is almost twice as high as the realized capitalization. So investors should still feel quite comfortable.
What may be concerning, however, is the speed at which the decline in the MVRV ratio has occurred. The chart shows that the metric’s 30-day MA has taken a steep decline and is now retesting the 365-day MA.
Historically, crossing the 30-day MA of the MVRV ratio below the 365-day MA has usually led to a bearish phase for the cryptocurrency. Such a ‘death cross’ last occurred towards the end of 2021, foreshadowing the bear market that would follow in 2022.
At the moment, the death cross in these MAs of the Bitcoin MVRV Ratio is yet to be confirmed, so the indicator can be checked in the near future. In the scenario that the 30-day MA continues this trajectory and falls below the 365-day MA, BTC could eventually witness another period with bears at the helm.
Related reading
However, there is also the possibility that the indicator reverses itself and the Death Cross formation ultimately fails to take shape.
BTC price
Bitcoin had crossed the $61,000 level yesterday, but it seems like the rise cannot continue as its value has already fallen to $59,400.
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com