On-chain data shows that the Bitcoin signal that led to gains of at least 70% on the last four occasions has formed again for the asset.
Bitcoin MVRV Momentum Saw a Bullish Crossover Recently
In a new post on X, analyst Ali Martinez discussed the recent trend in the Bitcoin Market Value to Realized Value Ratio (MVRV). The âMVRV Ratioâ is an indicator that tracks the ratio between Bitcoinâs market capitalization and its realized capitalization.
Realized capitalization here refers to an on-chain capitalization model that calculates the total value of an asset by assuming that the real value of any token in circulation is the price at which it last traded on the blockchain, not the current spot price.
The last traded price of any coin is likely its most recent cost basis, so the actual market cap is essentially the sum of the cost basis of all tokens in circulation. In other words, this model represents the capital that investors have put into the asset.
In contrast, market capitalization, which calculates the total valuation of the total BTC supply at current spot prices, represents the value that investors hold right now.
When the MVRV Ratio value is greater than 1, investors hold more value than they put in, so they are in a net profit. On the other hand, a figure below this threshold indicates that the entire market is in a loss.
Here is a chart showing the trend in Bitcoin's MVRV Ratio and its 180-day moving average (MA) over the past few years:
As shown in the chart above, Bitcoin's MVRV Ratio has spiked recently as the asset's price has undergone a recovery, implying that investor returns have improved.
With this increase, the indicator has now crossed above the 180-day MA. Historically, a spike above this line means that the momentum of the metric has turned positive, which has proven to be a bullish predictor of price action.
In the chart, the analyst highlighted previous price rallies that followed a momentum reversal in the MVRV Ratio. BTC appears to have seen gains of at least 70% in each of the last four.
Following this precedent, the latest shift in the MVRV Ratio momentum into the green could once again lead to a surge for Bitcoin. However, it remains to be seen whether any such rally will be of the same scale as previous ones.
