MVRV Ratio - Market Value vs Realized Value
What is MVRV
MVRV (Market Value to Realized Value) is the ratio between Bitcoin's Market Cap and Realized Cap. It is the most representative on-chain valuation metric for determining whether the market is currently overvalued or undervalued.
MVRV = Market Cap / Realized Cap
Simply put, it shows "how many times higher the current market price is compared to the average acquisition cost of all participants."
Calculation Example
| Item | Value |
|---|---|
| Current Bitcoin Price | $80,000 |
| Circulating Supply | 19,800,000 BTC |
| Market Cap | $1,584,000,000,000 |
| Realized Cap | $528,000,000,000 |
| MVRV | 3.0 |
An MVRV of 3.0 means the current market price is 3 times the average acquisition cost. In other words, market participants are holding an average of 200% unrealized profit.
MVRV Range Interpretation
Key Thresholds
| MVRV Range | Meaning | Market State |
|---|---|---|
| Above 3.5 | Extreme overvaluation | Near market top. Large-scale profit-taking imminent |
| 2.5 - 3.5 | Overvaluation | Overheated zone. Caution needed |
| 1.0 - 2.5 | Fair to slightly overvalued | Normal bull market range |
| 1.0 | Break-even | Market price = Average acquisition cost |
| 0.8 - 1.0 | Slightly undervalued | Late bear market. Accumulation opportunity |
| Below 0.8 | Extreme undervaluation | Capitulation zone. Historic bottom |
MVRV > 3.5: Overvaluation (Near Top)
All historical instances where MVRV exceeded 3.5 coincided with major cycle peaks. When average returns exceed 250%, most holders are tempted to take profits, and selling pressure increases dramatically.
MVRV < 1.0: Undervaluation (Near Bottom)
MVRV below 1.0 means on average, all holders are in a loss position. Additional selling in this range is mostly capitulation selling, suggesting that there are almost no sellers left.
Historical Patterns
| Cycle | MVRV Peak | MVRV Low | Pattern |
|---|---|---|---|
| 2013 | ~5.8 | ~0.7 | Double top structure, exceeded 3.5 twice |
| 2017 | ~4.7 | ~0.7 | Single peak. Sharp decline |
| 2021 | ~3.9 | ~0.85 | Double top. Reflects cycle maturity |
A notable observation is that MVRV peaks have been declining with each cycle. This indicates that extreme overheating diminishes as the market matures.
MVRV Z-Score
Definition
MVRV Z-Score is a statistically normalized version of MVRV that shows how far the market price has deviated from the realized price in standard deviation units.
MVRV Z-Score = (Market Cap - Realized Cap) / Standard Deviation(Market Cap)
Interpretation
| Z-Score | Meaning | Color (Chart) |
|---|---|---|
| Above 7 | Extreme overheating | Red |
| 4 - 7 | Overheating | Orange |
| 2 - 4 | Bullish | Yellow |
| 0 - 2 | Neutral to slightly bullish | Green |
| Below 0 | Undervaluation | Green |
Z-Score captures extreme areas better than MVRV. Particularly when Z-Score exceeds 7 at cycle peaks, it has been a very strong sell signal.
Cohort-Based MVRV
Beyond overall MVRV, analyzing MVRV for specific holder groups provides deeper insights.
LTH-MVRV (Long-Term Holders)
This is the MVRV based on coins held for more than 155 days. It shows the profit level of long-term holders, and when they begin large-scale profit-taking, it signals a cycle peak.
STH-MVRV (Short-Term Holders)
This is the MVRV based on coins held for less than 155 days. The profit/loss status of short-term holders reflects the immediate market sentiment.
| Indicator | STH-MVRV < 1 | STH-MVRV > 1 |
|---|---|---|
| Bull Market | Buying opportunity during correction | Normal state |
| Bear Market | Further decline possible | Bounce zone (selling opportunity) |
Combining with Other Indicators
MVRV + Exchange Flows
- MVRV above 3.5 + Exchange net inflow increasing → Very strong sell warning
- MVRV below 1.0 + Exchange net outflow → Strong bottom signal
MVRV + Technical Indicators
- MVRV overheated zone + RSI overbought + MACD death cross → Strengthened sell signal
- MVRV undervalued zone + Bollinger Bands lower band breach → Strengthened buy signal
MVRV + SOPR
While MVRV shows the market's unrealized profit/loss, SOPR shows the actually realized profit/loss. Looking at both indicators together allows you to understand "how much profit people are holding and how much they're actually selling."
Practical Application Tips
Cycle Positioning
- MVRV < 1.0: Accumulate as much as possible. Historically, buying in this range has always delivered significant returns.
- MVRV 1.0 - 2.5: Hold position. Healthy bull market zone.
- MVRV 2.5 - 3.5: Begin gradual selling. Risk management phase.
- MVRV > 3.5: Actively take profits. Overheated zone.
Cautions
MVRV is suitable for long-term cycle assessment and changes too slowly to be used as a short-term trading signal. For short-term timing, SOPR or technical analysis indicators are more effective.
Limitations and Considerations
Limitations of Cross-Cycle Comparisons
As the market matures, MVRV's extreme values may change. Just because 3.5 was a top in past cycles doesn't guarantee the same threshold will mark the top in the next cycle.
Impact of New Demand
When new demand sources like ETFs or institutional investment are added, the "normal range" for MVRV may shift upward. Don't rely solely on past patterns; consider changes in market structure as well.
Supply Distortion
Lost coins have the effect of lowering Realized Cap, which raises MVRV. This may cause MVRV to display slightly higher than the actual degree of overheating.
Summary
MVRV is a core on-chain indicator that determines market over/undervaluation through the ratio of market cap to realized cap. Above 3.5 indicates overheating, while below 1.0 indicates undervaluation. Z-Score and cohort analysis can increase precision. When combined with exchange flows, SOPR, and technical indicators, it becomes a powerful cycle assessment tool.
Next article: NVT Ratio - The On-Chain P/E Ratio