To The Moon

I think we have seen very good performance from some of the major crypto stocks over last week. As I have mentioned in some of my previous article before, some of the crypto stocks actually move with Bitcoin.

In this article I would like to share with you what is MVRV Ratio and how we can make use of this metric to gauge the market sentiment and identify potential buying or selling opportunities.

We will explore the Bitcoin MVRV ratio, its significance, and how investors can utilize it to make informed decisions.

With this informed decisions, we can then use it to predict crypto stocks like $Marathon Digital Holdings Inc(MARA)$ price and trend movement.

Bitcoin Price and Volume Chart

What is the Bitcoin MVRV Ratio?

The Bitcoin MVRV ratio is a metric that compares the market value of all circulating bitcoins with the realized value of those coins.

Market value refers to the current price of Bitcoin, multiplied by the number of coins in circulation. Realized value, on the other hand, calculates the average price at which all the bitcoins in existence were last transacted.

Essentially, the MVRV ratio provides an indication of whether the market value of Bitcoin is overvalued or undervalued relative to its realized value.

It helps investors gauge the level of investor enthusiasm or fear in the market and can serve as a tool to identify potential buying or selling opportunities.

Interpreting the MVRV Ratio

The MVRV ratio is typically presented as a line chart, with a value of 1.0 representing a fair valuation of Bitcoin.

When the ratio is above 1.0, it suggests that the market value of Bitcoin is higher than the realized value, indicating a potentially overvalued market.

Conversely, when the ratio falls below 1.0, it implies that the market value is lower than the realized value, signaling a potentially undervalued market.

Additionally, extreme spikes or dips in the MVRV ratio can provide insights into market sentiments.

For example, a sudden surge in the ratio may indicate excessive greed and speculative activity, potentially foreshadowing a market correction.

Conversely, a sharp drop in the ratio might suggest widespread fear and panic selling, possibly indicating a buying opportunity.

Utilizing the MVRV Ratio in Investment Strategies

The MVRV ratio is a useful tool for investors, providing an additional perspective on Bitcoin's market dynamics. Here are a few ways it can be utilized:

Identifying market tops and bottoms

By monitoring the MVRV ratio, investors can spot potential market tops (when the ratio is significantly above 1.0) and bottoms (when the ratio is substantially below 1.0).

These levels can be used to inform decisions about buying or selling Bitcoin.

Timing entry and exit points

When the MVRV ratio reaches extreme levels, it can help investors time their entry or exit points in the market.

For example, a high MVRV ratio may indicate an opportune moment to sell, while a low ratio could present a good buying opportunity.

Assessing market sentiment

Monitoring the MVRV ratio over time can provide insights into the overall sentiment of Bitcoin investors. It can help investors understand whether the market is driven by optimism or pessimism, which can guide their decision-making process.

Limitations and Considerations

While the Bitcoin MVRV ratio is a valuable metric, it is essential to recognize its limitations.

The ratio is based on historical data and does not consider future market developments or external factors that may impact Bitcoin's value.

Additionally, it is important to use the MVRV ratio in conjunction with other technical and fundamental analysis tools to make well-informed investment decisions.

How I Use MVRV ratio with SMA365

From the chart below, MVRV is currently above 1 (1.46) and close to its 365-day moving average (SMA365) (orange line), signaling bitcoin is closer to start a new upward cycle.

We can use MVRV ratio to see if the bitcoin price is undervalued (cheap) or overvalued (expensive).

When MVRV is above 3.7 (Light Red Area) bitcoin is said to be overvalued (market tops); when it is below 1 (Light Green Area), bitcoin is said to be undervalued (market bottom)

From the below chart, we can see that there is an early sign of developing bull market cycle. Hence, let us look at some of the crypto stocks.

Why I think MARA would benefit from this Bull market cycle

I used the Moving Averages (SMA50/200) to check if MARA trend is moving in tandem as the Bitcoin early sign of bull market cycle.

It seem like MARA would be benefiting from Bitcoin early signs of bull market cycle. $Marathon Digital Holdings Inc(MARA)$ is moving upwards in its bull trend.

It is time to watch MARA closely if you have not looked into it.

Summary

The Bitcoin MVRV ratio is a powerful metric that can help investors gauge the market sentiment and identify potential buying or selling opportunities.

By comparing the market value of Bitcoin with its realized value, the MVRV ratio provides insights into whether the market is overvalued or undervalued.

While it should not be the sole basis for investment decisions, by using it with SMA365, it give us a better picture as we can see that Bitcoin is in early signs of bull market cycle.

We have also checked out one crypto stocks who has been trading in tandem with Bitcoin, and it seem like it is also in an early bull trend.

And the bull trend is also developing upwards.

Appreciate if you could share your thoughts in the comment section whether you find MVRV ratio useful, it is pretty to understand actually.

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.)