MVRV and MVRV-Z metrics serve as crucial tools in cryptocurrency analysis, allowing for the assessment of Bitcoin's value and the identification of key market trends.
What is MVRV?
MVRV (Market Value to Realized Value) is a long-term valuation metric introduced in 2018 by analysts Murad Mahmudov and David Puell. It helps determine whether Bitcoin is overvalued or undervalued based on the relationship between its market cap and realized cap. A high MVRV indicates a potential market overheating, while low MVRV points to bearish sentiments and possible accumulation zones.
How is MVRV Calculated?
The formula for calculating MVRV is straightforward: MVRV = MV / RV, where MV is market value and RV is realized value. Market Value is determined by multiplying the current price of Bitcoin by its circulating supply. Realized Value, however, considers the price at which each Bitcoin last changed hands on-chain, averaging these values across all circulating Bitcoin.
What is MVRV-Z?
MVRV-Z Score is a refined indicator that helps detect extreme highs or lows in Bitcoin's valuation. It is calculated using the formula: MVRV-Z = (Market Value – Realized Value) ÷ Standard Deviation of Market Value. This metric helps identify when Bitcoin is severely overvalued or undervalued, especially during longer market cycles.
MVRV and MVRV-Z metrics provide valuable insights for long-term investors, helping better understand market conditions and manage risks. However, like any indicator, they should be used in conjunction with other analytical methods.
