This is what the examination of a well-known technical indicator known as the Market Value to Realized Value Ratio, or MVRV Ratio, reveals.
This Ratio, which is computed by dividing Bitcoin’s current market capitalization by its market capitalization at the realized PricePrice (that is, the average Price at which each Bitcoin token has moved in the most recent transaction), just hit 1.48, which is its highest level since April of last year.
It was the first time it had risen above 1 since November 2022, when it did so in January of this year, and it has continued to grow ever since, given the continuous rise in the price of Bitcoin.
The MVRV Ratio dropping below 1.0 has traditionally occurred during the later stages of a bear market for Bitcoin, as can be seen in the graph that was just presented.
Historically speaking, a wonderful buy signal has been acted upon when the index has risen back over 1.0 on a sustained basis. This is because it indicates that the Bitcoin market has entered the early phases of a bull market.
MRVR Z-Score Sending Even More Convincing Bull Sign
Glassnode’s preferred MVRV-related indicator to monitor is the Z-score of the MVRV Ratio since it sends even more convincing bull signs.
They arrive at this conclusion by first determining the difference between Bitcoin’s market cap and its realized cap and then dividing that difference by the standard deviation of Bitcoin’s market cap over the course of its history.
This Z-score was last seen somewhere at 0.71 on Monday, after having climbed back above zero early this year in conjunction with the price rebound of Bitcoin.
A persistent rebound from levels below zero, such as the one that we are presently watching, has typically coincided with the beginning phases of a bull market for Bitcoin.
How Much Further Can the Price of Bitcoin Go During This Bull Market?
Assuming that a new Bitcoin bull market has begun, long-term investors will now be examining how high prices could grow in the future years as they determine at what levels to take profit. Specifically, they will be looking at how much higher prices could rise than they are currently.
The MVRV Ratio is a valuable tool that may be utilized to determine when a market is becoming overheated and when a potential price peak may be on the horizon.
As can be seen in the first chart, increases in the MVRV ratio to above the 3 to 4 levels have traditionally coincided with the most intense moments of a bull market and have frequently occurred in advance of significant price decreases. This has been the case in many different markets throughout history.
A helpful chart is provided by Glassnode, which puts the current PricePrice of Bitcoin alongside lines that depict where the PricePrice would be at various MRVR Ratios.
If the MVRV Ratio was 2.4, the PricePrice would be approximately $47,700 as of Monday, the 17th of April. However, if it was 3.2, the PricePrice would be approximately $63,600.
If the PricePrice of Bitcoin was at these levels, then it would be reasonable to assert that the market is seeing extremely high levels of activity right now.
However, it is vital to keep in mind that previous periods of bull markets have been accompanied by sharp increases in the Realized Price. This is because an increasing number of investors enter the market at this time, paying higher prices for coins than in times past.
The MVRV Ratio bands are raised to a higher level because of the growth in the Realized Price.
For instance, the realized price of Bitcoin more than tripled from roughly $6,000 to over $20,000 during the bull market that lasted from the latter half of 2020 through the first half of 2021.
This resulted in the 2.4 and 3.2 MVRV Ratio bands being three times higher than before, which is about equivalent to where they are now (around $47,000 and $63,000, respectively).
The Realized PricePrice is almost guaranteed to see a continuous climb in the following quarters and years if we are in a new Bitcoin bull market, and this will push the 2.4 and 3.2 MVRV Ratio bands higher as a result. If we are in a new Bitcoin bull market, we are also in a new Bitcoin bull market.
How much further up is it? There is no one who can say for certain.
But let’s assume it’s three times higher than it is right now, similar to how it was during the most recent bull market.
That would put the 2.4 MVRV Ratio range into the region, including 140–150 thousand dollars.
In the meantime, the 3.2 MVRV Ratio range would increase to somewhere around $190,000.
This means that we might really be able to witness Bitcoin’s Price climb into the upper $100,000s in the future years before we start labeling the rally as getting dangerously hot. This is before we start labeling the rally as getting dangerously hot.
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