Crypto Assets Starting To Become “Overbought,” Santiment Says

Keshav Verma

1 year ago

3 mins read

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Data from Santiment shows that crypto market assets have now started to enter into the “overbought” territory, but they aren’t yet in the danger zone.

Crypto Assets Are Slightly Overbought Right Now, According To MVRV

As per data from the on-chain analytics firm Santiment, traders are currently slightly in the green. The relevant indicator here is the “Market Value to Realized Value” (MVRV) ratio, which measures the ratio between the market cap of an asset and its realized cap.

The “realized cap” here is a sort of fair value model that can be applied to any crypto. Since the MVRV ratio compares the value of the asset (the market cap) with this “true value,” the indicator’s value can provide hints about whether the given asset is overpriced or underpriced right now.

When the value of this metric is greater than 1, it means the market cap is higher than the realized cap right now, meaning that traders are on average in some profit. High values above this mark generally suggest that the asset is currently overbought.

On the other hand, values below this mark imply the average holder is underwater at the moment, and hence the crypto may be underpriced currently.

Now, Santiment has defined an “opportunity zone” and a “danger zone” for the MVRV, which, as their names already imply, are zones inside which the indicator gives buy or sell signals.

Here is a graph that shows how far the MVRV is from these zones (on different timeframes, like 1-day, 7-day, etc.) for various assets in the crypto market:

Looks like most of the values are in the negative right now | Source: Santiment on Twitter

As you can see in the above graph, assets become overbought when the MVRV divergence from the danger zone hits -1. Similarly, the underbought condition takes place at +1.

Note that this is reversed from how the MVRV ratio works (where values above 1 indicate the overpriced zone). Santiment says that the flipped polarity is intentional, as it makes things more intuitive.

From the chart, it’s apparent that all the cryptos in the market are inside the negative zone on at least some of the timeframes, suggesting that their prices are slightly overpriced right now.

However, most of the assets haven’t yet hit the danger zone, as the likes of Bitcoin, Ethereum, and XRP have current MVRV divergence values standing at -0.27 or lower. This could mean that their prices may not be at too much risk of a correction currently.

Nonetheless, it still implies that the market as a whole is still carrying some profits at the moment. “Markets move up with the highest probability when traders’ assets are underwater. Currently, they’re mildly over,” explains the analytics firm.

BTC Price

At the time of writing, Bitcoin is trading around $24,300, down 1% in the last week.

The value of the asset seems to have been consolidating in the last few days | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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