Cryptocurrency analysis platform CryptoQuant has released a report suggesting that Bitcoin's MVRV ratio and moving averages are important indicators of the market's bullish or bearish trends.
The report emphasizes that the MVRV rate broke the 1 level in January 2023, signaling a significant increase in the price of Bitcoin, resulting from significant accumulation in both the spot and derivatives markets.
MVRV stands for Market Cap to Realized Value ratio, which is a metric used to analyze the value of Bitcoin. It compares Bitcoin's current market value to its realized value, which is Bitcoin's value based on the price each unit last moved on the blockchain.
Analysis of Bitcoin's MVRV Ratio and Moving Averages: Insights into Bull and Bear Markets and the Importance of the 1.5 Threshold
— CryptoQuant.com (@cryptoquant_com) May 4, 2023
The report states that the 1.5 level is a critical threshold for Bitcoin to enter a bull rally, as major investors are watching the MVRV indicator closely to hoard low-priced Bitcoins during dips. Currently, Bitcoin's MVRV rate fluctuates between 1.55 and 1.45 this month, hitting a monthly low of 1.36 on April 21, when the price of Bitcoin dropped to $26,800. However, when Bitcoin hits 30k, it went back to 1.45.
The report also explains that the technical insights gained by applying moving averages to the MVRV ratio are valuable. Three moving averages, namely the 30-day simple moving average (30DSMA), 90DSMA, and 365DSMA, were applied in the report. Historical data shows that the Bitcoin MVRV rate experienced a trend change when it broke 365DSMA, according to analysts.
If the ratio breaks this moving average in an uptrend, this would characterize the start of a bull market and the MVRV ratio will change direction to reach levels typically 2 to 3.75 or higher. Conversely, when the MVRV rate breaks the 365DSMA in a downtrend, it marks the beginning of a bear market and the rate changes direction to reach 1 or lower lows.
The report predicts that if Bitcoin surpasses the 30,000 price level, the MVRV rate will shift to a value range between 1.8 and 2.
*Not investment advice.