MVRV is an on-chain indicator that helps assess whether the market is overvalued or undervalued by comparing Bitcoin's current market value with its realized value (calculated based on the on-chain cost basis). This indicator divides the market valuation into three key ranges:
Below 1: Undervalued Range
1 - 2: Neutral Range
Above 2: Overvalued Range
When the MVRV is below 1, it indicates that Bitcoin's current market value is lower than its realized value, meaning the market is in an overall loss state. Historically, this level often aligns with market bottoms and presents a potential buying opportunity for long-term investors. At this point, market sentiment may be very pessimistic, and Bitcoin could be about to rebound, so could consider gradually accumulating Bitcoin, as it may be severely undervalued and has significant upside potential.
When the MVRV is between 1 and 2, it indicates that Bitcoin's current market value is slightly higher than its realized value, and the market is in a state of moderate profit. This range reflects relatively balanced market sentiment, where the price is neither excessively overvalued nor undervalued. For long-term investors, this is an ideal time to continue holding or dollar-cost averaging without making significant changes to the strategy.
When the MVRV is above 2, it indicates that Bitcoin's current market value is significantly higher than its realized value, and the market is in a state of high profitability. Historically, this level often signals market tops, and Bitcoin may be at risk of a pullback. At this point, investors should be cautious of potential selling pressure.
The indicator reliability between Bitcoin’s price and the MVRV Index ranges from 0 to 1. Based on regression model tests conducted by the RightPulse Lab, the closer the indicator reliability value is to 1, the more reliable this indicator becomes for decision-making.
