In the past, around March 2024, when the MVRV was at the level of 2.8, I analyzed that Bitcoin had reached an overheating point during the recovery phase. At the same time, I predicted that a price or temporal adjustment of Bitcoin (adjustment of MVRV) was necessary.
Since then, the current MVRV has decreased to around 1.99, with the MV being less than twice the RV. Additionally, it is approaching the mid-band of the Bollinger Bands (a region distinguishing between an uptrend and a downtrend) and the 4-year moving average based on Bitcoin's 4-year cycle. (These are at 1.89 and 1.82 respectively, indicating there is still a gap.)
In the past, during peaks of overheating in recovery phases, the market typically adjusted to these regions. The MV would come down, or the RV would go up, showing signs of resolving the MVRV overheating.
Moreover, these signs were usually observed just before the start of a parabolic rise. It is likely a collaboration of profit-taking by smart money who bought at the bottom and the influx of new funds driven by news and SNS mentions.
The continued balance of these factors resolved the MVRV overheating (the disparity between the market price and the actual purchase price), which generally indicated a local bottom.
We need to watch closely to see if this will be the case this time as well.
Written by CoinLupin