Bitcoin Surpasses Key MVRV Ratio Level Indicating Overheated Conditions
On-chain data indicates that Bitcoin has surpassed a critical level of the Market Value to Realized Value (MVRV) Ratio, historically associated with overheated market conditions.
Bitcoin Has Surpassed Highest MVRV Deviation Pricing Band
The analytics firm Glassnode recently reported on Bitcoin's status through the lens of the MVRV Ratio. The MVRV Ratio tracks the relationship between Bitcoin's market cap and its realized cap, an on-chain metric reflecting the total capital invested by holders when purchasing their tokens.
This ratio reveals the profitability of Bitcoin addresses by comparing initial investments to current market value. Glassnode's pricing model utilizes standard deviations from the MVRV Ratio's mean rather than the ratio itself. The following chart illustrates this model:
In this model, specific BTC prices correspond to values of the MVRV Ratio at certain standard deviations above or below its mean. For example, the +0.5 SD level indicates the MVRV Ratio is 0.5 SD greater than its mean value.
The graph shows that Bitcoin's price has exceeded the highest pricing band, currently set at +1.0 SD, which equals $90,200. Historically, Bitcoin tends to reach peaks when surpassing this band due to significant profits held by investors, leading to potential profit-taking selloffs.
The last instance of Bitcoin breaking this barrier occurred in Q1 of this year, where it quickly topped out. However, during strong bull markets, Bitcoin has often remained in this overheated zone for extended periods before reaching a peak. An example from the first half of the 2021 bull run demonstrates that Bitcoin maintained this territory for months due to substantial capital inflows.
Consequently, it is not guaranteed that Bitcoin will immediately hit a cyclical top now that it is considered overheated according to this model.
BTC Price
Bitcoin initially rose beyond $98,000 recently but has since experienced a slight decline, currently trading at $97,500.
